2026-VIL-77-ORI
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SGST High Court Cases

GST - Eligibility to interest on refund of IGST paid on ocean freight paid “under protest” – Subsequent to levy of IGST on ocean freight was held as unconstitutional and ultra vires the IGST Act, the petitioner applied for refund of the IGST paid on ocean freight, which was granted by the authorities. However, the authorities refused to grant interest on the refunded amount - Whether the petitioner is entitled to interest on the refunded IGST amount paid on ocean freight from the date of deposit till the date of actual refund – HELD - When a tax levy is found to be unconstitutional and invalid, the State cannot retain the amount collected and must refund it to the taxpayer and in such cases, the taxpayer is entitled to interest on the refunded amount as a matter of restitution, irrespective of whether the statute provides for it explicitly – As is well-established that the law declared by the Hon’ble Supreme Court of India is the law from the inception. On the notifications based on which the IGST on “ocean freight” was levied and collected by the Revenue being struck down as invalid, the petitioner is entitled to compensation by way of award of interest on the amount retained for the period from the date of deposit till the date of its actual refund - The IGST paid by the petitioner on ocean freight was not legally exigible, as the levy was declared unconstitutional by the Courts. Therefore, the retention of this amount by the authorities was unauthorized, and the petitioner is entitled to interest on the refunded amount from the date of deposit till the date of actual refund - The provisions of Section 56 of the CGST Act dealing with “Interest on delayed refunds” is silent about grant of interest on refund when it emanates from declaration of the statutory notifications as illegal or ultra vires or the levy and collection of tax being rendered constitutionally invalid. The case of present nature could be comprehended within any of the contingencies specified under Section 56 read with Rule 89. The authorities are directed to pay simple interest at 6% per annum on the refunded IGST amount within 8 weeks, and at 9% per annum for any further delay - The writ petition is allowed
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