Summary / Headnotes
Held - The Court allowed the Revenue's appeal and held that although the levy of IGST on ocean freight had been declared unconstitutional in Mohit Minerals, the refund could not be paid to the assessee since the incidence of tax had admittedly been passed on to consumers. Such refund was governed by Sections 54(5), 54(8)(e) and 57 of the CGST Act, under which the amount had to be credited to the Consumer Welfare Fund, as the exception permitting payment to the applicant was inapplicable. The Court further held that the High Court's direction permitting the assessee to route the refund to consumers through tariff adjustments devised an impermissible mechanism not contemplated by the statute, set aside the High Court's judgment, and directed the assessee to transfer the refund amount to the Consumer Welfare Fund within three months, while leaving the declaration in Mohit Minerals undisturbed. (Paras 4 to 11).
Appeal allowed/In favour of department
AI Summary of the Case
Question Answered
Issue 1: Whether an assessee who has passed on the incidence of IGST on ocean freight to its consumers is entitled to receive the refund amount after the levy is declared unconstitutional.
Views: Where the incidence of tax has been passed on to consumers, the refund cannot be paid to the assessee. In such cases, Sections 54(5), 54(8)(e) and 57 mandate that the refundable amount be credited to the Consumer Welfare Fund, as the exception under Section 54(8)(e) is inapplicable. (Paras 4 to 11).
Issue 2: Whether the High Court could devise an alternative mechanism for passing the refund amount to consumers through tariff adjustments instead of crediting it to the Consumer Welfare Fund.
Views: The High Court could not introduce a refund mechanism not contemplated by the GST statute. The proposed tariff-adjustment method was contrary to Section 54 and the Rules, and the amount was directed to be transferred to the Consumer Welfare Fund within three months. (Paras 8 to 11).
Citations
- Mohit Minerals Pvt. Ltd. v. Union of India — 2020 (33) G.S.T.L. 321 (Guj.)
- Union of India v. Mohit Minerals Private Limited — 2022 (61) G.S.T.L. 257 (S.C.)
Judgment
IN THE SUPREME COURT OF INDIA
before the bench of
mr. Sanjay Kumar and
mr. K. Vinod Chandran, JJ.
Union of India
Versus
Torrent Power Ltd.
SLP Appeal (C) No. 13084 of 2025, decided on 10-2-2026
REPRESENTED BY:
Shri S. Dwarakanath, A.S.G.,
Shri Gurmeet Singh Makker, AOR,
Shri Sarthak Karol,
Shri Digvijay Dam,
Ms. Divya Jyoti Singh,
Shri Raghav Sharma,
Shri Rajat Vishnaw,
Shri S. Vijay Adithya,
Shri Mudit Bansal,
Shri Prabhakar Yadav and
Shri Abhyudey Kabra, Advs., for the Petitioner
Shri V. Lakshmikumaran,
Ms. Nitum Jain,
Ms. Neha Choudhary,
Ms. Medha Sinha,
Shri Swastik Mishra, Advs. and
Ms. Charanya Lakshmikumaran, AOR, for the Respondent
[Order]. - Leave granted.
2. The Union of India and its Assistant Commissioner of Central Goods and Services Tax at Ahmedabad are in appeal, aggrieved by the judgment dated 23.10.2024 passed by the High Court of Gujarat, Ahmedabad Torrent Power Ltd. v. Union of India [2025 (95) G.S.T.L. 437 (Guj.) = (2025) 26 Centax 409 (Guj.)], in relation to the refund of Rs. 19,28,86,868/- (Rupees nineteen crores twenty eight lakhs eighty six thousand eight hundred sixty eight only).
3. Torrent Power Ltd., the respondent-company, is a generator and distributor of power in the State of Gujarat. It is not in dispute that the respondent-company collected from its consumers the amounts payable towards Integrated Goods and Services Tax, pursuant to Notification No. 10/2017-Integrated Tax (Rate), dated 28.06.2017 issued by the Revenue. The said notification was, however, held to be unconstitutional by the High Court, vide the judgment Mohit Minerals Pvt. Ltd. v. Union of India [(2020) 74 GSTR 134 = 2020 (33) G.S.T.L. 321 (Guj.)]. The judgment was confirmed by this Court, when the appeals arising there from were dismissed by this Court, vide the judgment Union of India v. Mohit Minerals Private Limited [(2022) 10 SCC 700 = 2022 (61) G.S.T.L. 257 (S.C.)]. The amounts paid under and pursuant to the invalidated notification, therefore, became refundable.
4. However, the issue presently is as to whether the High Court was justified in coming up with a procedure, not contemplated by the statute, for refund of such amounts to the class of consumers, who purportedly bore the burden of the tax collected from June, 2017, till the notification was set aside in January, 2020.
5. We may note, in this regard, that Section 54(5) of the Central Goods and Services Act, 2017, provides that, upon receipt of an application for refund, the officer is to satisfy himself that the whole or part of the amount claimed as refund is actually refundable and if found to be so, he is required to make an order accordingly and the amount so determined is to be credited to the Consumer Welfare Fund, referred to in Section 57 of the CGST Act. It is only by way of exception under Section 54(8) of the CGST Act that the amount found to be refundable is not credited to the aforestated fund and is paid to the applicant.
6. Section 54(8)(e) of the CGST Act provides to the effect that, notwithstanding anything contained in Sections 54(5), the refundable amount shall, instead of being credited to the fund, be paid to the applicant, if such amount is relatable to the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person.
7. In the present case, as it is an admitted fact that the incidence of the tax that was collected, pursuant to the Notification dated 28.06.2017, was passed on by the respondent-company to the consumers, the exception envisaged by Section 54(8) (e) did not even apply.
8. Despite the same, the High Court accepted the offer made by the respondent-company, by way of an affidavit, stating that it would open a separate designated bank account in a scheduled bank and the refunded amount of Rs. 19,28,86,868/- (Rupees nineteen crores twenty eight lakhs eighty six thousand eight hundred sixty eight only) would be transferred to the said account. The respondent-company undertook that it would not utilize the amount credited in the said account and would offer the same as revenue for the purpose of determination of tariff by the Gujarat Electricity Regulatory Commission under the Electricity Act, 2003.
9. The intention of the respondent-company was that it would go before the Commission and ask for reduction of the charges to be levied on the consumers, so as to adjust the refunded amount, thereby ensuring that the consumers, who suffered the levy of the tax imposed earlier, would be recompensed. However, we may note that this gargantuan exercise would involve more than a crore of consumers situated in two cities, Ahmedabad and Surat. Further, it would be an equally unworkable exercise for the authorities concerned to verify whether the consumers who actually bore the burden of the levy of tax were the beneficiaries of such refund.
10. Further, we must also note that this procedure, which was suggested by the respondent-company and accepted by the High Court by way of the impugned judgment/order, introduces an altogether alien modality for disbursal of a refund, which is not contemplated by Section 54 of the CGST Act and the Rules framed therein.
11. We are, therefore, of the opinion that the judgment under challenge is not sustainable on facts and in law. The same is, accordingly, set aside.
12. The respondent-company shall transfer Rs.19,28,86,868/- (Rupees nineteen crores twenty eight lakhs eighty six thousand eight hundred sixty eight only) to the authorities concerned so as to be credited to the Consumer Welfare Fund, referred to in Section 57 of the CGST Act. The respondent-company shall complete this exercise within a period of three months from today.
13. The appeal is allowed in the aforestated terms.
14. Pending application(s), if any, shall stand disposed of.