In a significant ruling that could impact numerous importers across India, the Bombay High Court has directed the Central GST authorities to pay ₹71.31 lakh in interest to West India Continental Oils Fats Pvt. Ltd., after it was found that the company was made to pay Integrated GST (IGST) on ocean freight without legal authority. The judgment, delivered by Justices M.S. Sonak and Advait M. Sethna on October 17, 2025, reinforces the principle that “no tax shall be collected without the authority of law,” enshrined under Article 265 of the Constitution.
Background
The case stemmed from the company’s payment of ₹2.62 crore in IGST between July 2017 and April 2019, under the reverse charge mechanism on ocean freight for imported palm oil. The company challenged the legality of the government’s 2017 notifications (Nos. 8 and 10) which imposed IGST on freight, arguing that they went beyond the scope of the IGST Act.
In August 2022, a coordinate bench of the Bombay High Court had already declared the levy unconstitutional, aligning with the Supreme Court’s ruling in Union of India v. Mohit Minerals Pvt. Ltd., which had held that importers cannot be charged IGST twice—once on goods and again on transportation. Following this, the company sought a refund of both the tax and the interest due.
However, while the GST authorities refunded the principal amount, they refused to pay the interest of ₹71,31,225, claiming that the refund was processed within the statutory 60-day window under Section 54 read with Section 56 of the CGST Act. The company, represented by advocate Jas Sanghavi, challenged this rejection before the High Court.
Court’s Observations
The bench took a critical view of the tax department’s reasoning, observing that the tax collected on ocean freight was itself illegal, as the underlying notifications had already been struck down by both the High Court and the Supreme Court.
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“The collection of the said tax was without authority of law. The respondents were legally obligated to refund the amount with interest,” the bench said.
Justice Sethna, writing for the bench, emphasized that the GST authorities could not hide behind Section 54 of the CGST Act, as that section applies only to lawful tax refunds. In this case, since the levy itself was unconstitutional, the doctrine of restitution applied — the government was bound to return both the principal and the interest for the time it held the taxpayer’s money.
Citing the Supreme Court’s decision in Ranbaxy Laboratories Ltd. v. Union of India and Hamdard (Waqf) Laboratories v. Union of India, the court reaffirmed that interest is a statutory and equitable right, not a favor. The bench further noted that the refusal to pay interest “would amount to conferring a premium on unjust enrichment,” and also violated Article 265 of the Constitution.
At one point, the bench sharply remarked,
“The revenue cannot shirk its statutory obligation to pay interest. To deprive the petitioner of interest would run contrary to the well-recognized legal principle of restitution.”
The court also relied on its recent ruling in Altisource Business Solutions India Pvt. Ltd. v. Union of India (2025), which had reiterated that the government is liable to pay interest if refund dues arise from an unlawful levy.
Rejecting the submissions made by the government counsel, Mr. Y.R. Mishra, the division bench held that the petitioner had “consistently and bona fide pursued” its claim and could not be penalized for procedural delays. It directed the respondents to pay the interest amount of ₹71,31,225 within four weeks from the date of the order.
Case Details: West India Continental Oils Fats Pvt. Ltd. vs Union of India & Ors.
Case Number: Writ Petition No. 3000 of 2023
