High Court Allows Writ Petition for Refund of IGST on Ocean Freight -- Sets Aside Appellate Order Directing Limitation Verification -- Reliance on Precedents for Mistake of Law Refunds

Sub Category: Gujarat High Court Bench: AHEMDABAD

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2026-03-03 13:13:59

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Case Note & Summary

The petitioners imported fertilizers on CIF basis, paying IGST on ocean freight under reverse charge mechanism as per RCM Notification No.10/2017. After the Mohit Minerals judgment, they filed a refund application under Section 54 of the CGST Act, 2017. The adjudicating authority rejected it, and the appellate authority, while allowing the appeal, directed verification of the limitation period for the refund. The petitioners challenged this in a writ petition, arguing that such verification is impermissible based on precedents and that the show-cause notice and hearing were defective. The High Court agreed, citing Comsol Energy and Joshi Technologies cases, which held that refunds for taxes paid under mistake of law are subject to the Limitation Act, 1963, not statutory limits. The Court allowed the petition, setting aside the appellate order and directing the adjudicating authority to process the refund without limitation verification.

Headnote

The petitioners, filed a writ petition under Article 226 of the Constitution of India seeking refund of Integrated Goods and Services Tax (IGST) paid on ocean freight under reverse charge mechanism -- They had paid GST based on Entry 10 of RCM Notification No.10/2017-Integrated Tax (Rate) dated 28.07.2017, and later sought refund under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) relying on the judgment in Mohit Minerals Pvt. Ltd vs. Union of India -- The adjudicating authority rejected the refund application, and the appellate authority, while allowing the appeal in part, directed verification of the limitation period for the refund claim -- The High Court, comprising Honourable Mr. Justice A.S. Supehia and Honourable Mr. Justice Pranav Trivedi, held that the appellate authority's direction to verify limitation was impermissible based on precedents including Comsol Energy Pvt. Ltd vs. State of Gujarat and Joshi Technologies International vs. Union of India -- The Court emphasized that refund claims for taxes paid under mistake of law are governed by the Limitation Act, 1963, not statutory time limits under tax acts -- The show-cause notice was undated, and the alleged hearing date was not referenced, rendering the proceedings defective -- The petition was allowed, setting aside the appellate order and directing the adjudicating authority to process the refund application without limitation verification

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Issue of Consideration: Whether the appellate authority erred in directing the adjudicating authority to verify the admissibility of the refund claim concerning the period of limitation, and whether the show-cause notice and hearing procedures were valid

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Final Decision

The High Court allowed the writ petition, set aside the appellate order dated 30.10.2023, and directed the adjudicating authority to process the refund application of the petitioners without verifying the admissibility concerning the period of limitation

2026 LawText (GUJ) (01) 565

R/Special Civil Application No. 11004 of 2024

2026-01-16

A.S. Supehia J. , Pranav Trivedi J.

2026:GUJHC:4290-DB

Ms. Amrita Thakore for Mr Bhavesh B Chokshi for the Petitioner, Ms Hetal G Patel for the Respondent

Indian Potash Limited and another

The Union of India and others

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Nature of Litigation: Writ petition under Article 226 of the Constitution of India challenging the appellate authority's order directing verification of limitation for a refund claim

Remedy Sought

The petitioners sought allowance of the writ petition to set aside the appellate order and direct processing of their refund application without limitation verification

Filing Reason

The appellate authority, while allowing the appeal, directed the adjudicating authority to verify the admissibility of the refund claim concerning the period of limitation, which the petitioners contended was impermissible

Previous Decisions

The adjudicating authority rejected the refund application; the appellate authority allowed the appeal in part but directed limitation verification; earlier judgments in Mohit Minerals and Comsol Energy cases supported refunds for taxes paid under mistake of law

Issues

Whether the appellate authority erred in directing verification of the limitation period for the refund claim Whether the show-cause notice and hearing procedures were valid and complied with due process

Submissions/Arguments

The petitioners argued that the appellate authority's direction to verify limitation was impermissible based on precedents like Comsol Energy and Joshi Technologies The petitioners contended that the show-cause notice was undated and the alleged hearing date was not referenced, violating procedural fairness The respondents argued that the petition should not be entertained as the appellate order was in the petitioners' favor, only requiring document submission

Ratio Decidendi

Refund claims for taxes paid under mistake of law are not governed by statutory time limits under tax enactments but by the Limitation Act, 1963, with a three-year period from the discovery of the mistake -- Appellate authorities cannot remand matters for limitation verification when refund is based on established judicial precedents -- Procedural defects in show-cause notices and hearings render orders invalid

Judgment Excerpts

The appellate authority has fell in error in directing the adjudicating authority to verify the admissibility of the refund claim in respect of period of limitation, which is impermissible in view of the judgments of this Court I also find that the adjudicating authority has not mentioned anything about the limitation period of the refund claim filed by the appellant The statutory time limit provided under Section 11B of the Central Excise Act is not applicable to the claim of refund of duty paid under mistake as the same was paid under mistake of law

Procedural History

The petitioners paid IGST on ocean freight and filed a refund application under Section 54 of CGST Act -- The adjudicating authority issued show-cause notices and rejected the application -- The petitioners appealed, and the appellate authority remanded the matter back -- The petitioners submitted a fresh refund application, which was again rejected -- The petitioners appealed again, and the appellate authority allowed the appeal but directed limitation verification -- The petitioners filed this writ petition challenging the appellate order