GST Refund on Ocean Freight Cannot be Denied on Limitation Grounds: Andhra Pradesh HC in Louis Dreyfus Case [Read Order]
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.
![GST Refund on Ocean Freight Cannot be Denied on Limitation Grounds: Andhra Pradesh HC in Louis Dreyfus Case [Read Order]](https://images.taxscan.in/h-upload/2025/08/18/2077987-gst-on-ocean-freight.webp "GST Refund on Ocean Freight Cannot be Denied on Limitation Grounds: Andhra Pradesh HC in Louis Dreyfus Case [Read Order]")
The Andhra Pradesh High Court has held that refund of Goods and Services Tax ( GST ) paid on ocean freight cannot be denied on the ground of limitation, observing that once such payment is not regarded as “tax,” the limitation period prescribed under the Act for claiming refund has no application.
M/s Louis Dreyfus Company Pvt. Ltd., which had imported agricultural products on a CIF basis during 2017 and paid GST on ocean freight under reverse charge, as mandated by Notifications No. 8/2017 and 10/2017.
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These notifications were invalidated by the Gujarat High Court in Mohit Minerals Pvt. Ltd. and the ruling was affirmed by the Supreme Court on 19 May 2022. Following this, Louis Dreyfus sought refunds in March 2023. However, the authorities rejected the claims as time-barred, stating Section 54 of the GST Act.
A Division Bench of Justice R. Raghunandan Rao and Justice Sumathi Jagadam rejected the Revenue’s objection, holding that once the Supreme Court had declared the levy invalid, the payments could not be treated as “tax” but only as sums paid under a mistake of law. Such amounts, the Bench said, were recoverable notwithstanding limitation provisions in the GST Act.
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. There is no such declaration in the judgment of the Hon’ble Supreme Court in Union of India v. Mohit Minerals.”
The Bench said that tax collected without authority of law is unconstitutional under Article 265 of the Constitution.
Justice Raghunandhan Rao and Justice Sumathi Jagadam held that “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. We are in respectful agreement with this proposition of law.”
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The Court further noted the Madras High Court’s view in Lenovo (India) Pvt. Ltd. that the two-year period under Section 54 is directory, not mandatory, and refund claims could be entertained even beyond that period in appropriate cases.
Accordingly, the Bench allowed the writ petitions, set aside the rejection orders, and directed the Assistant Commissioner to reconsider Louis Dreyfus’s refund applications filed on 30 March 2023 “without going into the question of whether the said application is within time or not”, and to pass orders within four weeks.
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