High Court Rules on GST Refund Claims Beyond Limitation Period for Invalid Ocean Freight Tax

The Hon'ble High Court of Andhra Pradesh at Amaravati in M/s Louis Dreyfus Company Private Limited vs Union of India & Others W.P.Nos.17220, 17224, 17226, 17229 & 17232 of 2024 dated August 14, 2025 held that refund applications for GST paid on ocean freight charges cannot be rejected solely on the ground of limitation under Section 54 of the CGST Act when such payments were made pursuant to notifications that were subsequently struck down by the Supreme Court. The Court directed the original authority to reconsider the refund applications without raising the question of limitation.

Facts of the Case

The Petitioner M/s Louis Dreyfus Company Private Limited is a registered person engaged in the business of import of agricultural products for onward use and sale within India. The Petitioner had imported certain agricultural products on CIF basis and paid GST on ocean freight charges on reverse charge mechanism basis for various months in 2017. The Petitioner had paid GST on the ocean freight charges on account of Notification No.8/2017-GST and Notification No.10/2017-GST.

These notifications were challenged before the Hon'ble High Court of Gujarat in Mohit Minerals Pvt. Ltd. vs Union of India and came to be struck down by judgment dated January 23, 2020. Aggrieved by the said judgment, the Central Government had approached the Hon'ble Supreme Court, which by judgment dated May 19, 2022, in Union of India and Anr. vs M/s. Mohit Minerals, had affirmed the view of the Hon'ble High Court of Gujarat and set aside these notifications.

After the judgment of the Hon'ble Supreme Court, the Petitioner filed applications dated March 30, 2023, for refund of GST paid on ocean freight charges in 2017. These applications came to be dismissed by separate orders dated May 25, 2023. Aggrieved by these orders of rejection, the Petitioner approached the appellate authority by appeal Nos. 63 to 67 of 2023 (G) GST. All the 5 appeals were dismissed by way of a common order dated February 27, 2024.

The refund applications pertained to the following periods: September 2017 (return filed October 18, 2017, limitation expired October 17, 2019), November 2017 (return filed December 23, 2017, limitation expired December 22, 2019), August 2017 (return filed September 20, 2017, limitation expired September 19, 2019), July 2017 (return filed August 23, 2017, limitation expired August 22, 2019), and December 2017 (return filed January 20, 2018, limitation expired January 19, 2020). All refund applications were filed on March 30, 2023, which was beyond the stipulated time under Section 54 of the GST Act. The Petitioner was aggrieved by the rejection of refund applications solely on the ground of limitation despite the fact that the underlying notifications had been struck down by the Supreme Court.

Issue

Whether refund applications filed under Section 54 of the CGST Act can be rejected solely on the ground of limitation when the tax was paid pursuant to notifications that were subsequently declared invalid by the Supreme Court.

Held by the Court

The Hon'ble High Court of Andhra Pradesh at Amaravati in W.P.Nos.17220, 17224, 17226, 17229 & 17232 of 2024 held that:

The Court observed that it is settled law that any judgment declaring the law would operate both retrospectively and prospectively as the Hon'ble Supreme Court is only declaring the law and is not creating any fresh law which would operate prospectively. The Hon'ble Supreme Court, with an intention to avoid unnecessary dislocation of the state of affairs, had innovated the concept of prospective overruling, whereby the Hon'ble Supreme Court, in a given case, could declare that the said judgment would operate prospectively and not retrospectively. However, this situation would arise only when the Hon'ble Supreme Court itself declares that the said judgment would be prospective in operation. There is no such declaration in the judgment of the Hon'ble Supreme Court in Union of India and Anr. vs. M/s. Mohit Minerals.

The Court held that the understanding of law is fortified by paragraph 5 of the judgment of the Hon'ble Supreme Court in Baburam vs. C.C. Jacob and Ors., which states that the prospective declaration of law is a devise innovated by the Apex Court to avoid reopening of settled issues and to prevent multiplicity of proceedings. By the very object of prospective declaration of law, it is deemed that all actions taken contrary to the declaration of law prior to its date of declaration are validated in the larger public interest.

The Court opined that following the precedent set by the Hon'ble High Court of Gujarat in Comsol Energy Private Limited vs. State of Gujarat, Section 54 of the CGST Act is applicable only for claiming refund of any tax paid under the provisions of the CGST Act. The amount collected by the Revenue without the authority of law is not considered as tax collected by them and, therefore, Section 54 is not applicable. In such circumstances, Section 17 of the Limitation Act is the appropriate provision for claiming the refund of the amount paid to the Revenue under mistake of law.

The Court held that any collection of tax would have to meet the requirements of Article 265 of the Constitution of India, which stipulates that no tax can be collected without authority of law. Where the levy of tax itself is found to be invalid or based upon an enactment or charging provision, which is subsequently found to be invalid or violative of the Constitution of India, any payment made in discharge of such a liability cannot be treated as an exaction of a tax at all. In such circumstances, payment of such an invalid tax would not be collection of tax and can be treated only as payment made by the dealer or a registered person under a mistake of law. Once the payment of money is not treated as payment of tax, the question of applying any period of limitation set out in any provision of the Act for refund of money cannot be applied.

The Court observed that there is no dispute that by virtue of the judgment of the Hon'ble Supreme Court, GST cannot be levied on ocean freight charges in CIF contracts in the course of import of goods into India. The only controversy left before the Court was whether an application for refund on March 30, 2023 is permissible. The Court held that in the circumstances, the application for refund cannot be treated to be beyond time and would have to be considered in the light of the judgment of the Hon'ble Supreme Court in the case of Union of India and Anr. vs. M/s. Mohit Minerals.

Relevant Sections

Section 54 of the CGST Act, 2017 - "Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed"

Article 265 of the Constitution of India - "No tax shall be levied or collected except by authority of law"

Section 17(1) of the Limitation Act, 1963 - "Where, in the case of any suit or application for which a period of limitation is prescribed by this Act, the suit or application is for relief from the consequences of a mistake"

Pari Materia / Cases Referred

1. Mohit Minerals Pvt. Ltd. vs Union of India 2020 SCC OnLine Guj 736D 

Challenge to GST notifications imposing tax on ocean freight charges in CIF contracts

Held: Gujarat High Court struck down Notification Nos.8/2017-GST and 10/2017-GST as invalid

2. Union of India and Anr. vs M/s. Mohit Minerals 61 GSTL 257D

Held: Supreme Court affirmed Gujarat High Court's decision and set aside the notifications

3. Comsol Energy Private Limited vs. State of GujaratCitation: 2020 SCC Online Guj 3601 = (2021) 55 GSTL 390

Held: Section 54 not applicable for amounts collected without authority of law; Section 17 of Limitation Act applies

4. Lenovo (India) Pvt. Ltd. vs. Joint Commissioner of GST (Appeals-1), Chennai and Ors.Citation: (2024) 121 GSTR 268 = 2023 SCC OnLine Mad 7810

Interpretation of language in Section 54(1) regarding time limit, Time limit under Section 54(1) is directory in nature, not mandatory; refund applications can be made even beyond two years in appropriate cases

5. Baburam vs. C.C. Jacob and Ors.Citation: (1999) 3 SCC 362

Held: Prospective declaration of law is used to avoid reopening settled issues; actions contrary to law prior to declaration are validated

6. State of Madhya Pradesh and Anr. vs. Bhailal Bhai and Ors.Citation: AIR 1964 SC 1006

Held: High Courts can direct repayment of money realized by Government without authority of law

7. Binani Cement Ltd. v. Union of India

Citation: (2013) 288 ELT 193 (Guj)

Held: Duty collected without authority is unconstitutional under Article 265; assessee not bound by special law limitation for refund

8. Gokul Agro Resources Ltd. v. Union of IndiaCitation: Special Civil Application No. 1758 of 2020Date: February 26, 2020

Held: Authority directed to pass appropriate order without raising technical issues regarding limitation

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