Refund of IGST on Ocean Freight to Consumer Welfare Fund Due to Unjust Enrichment | SC

Case Details: Union of India vs. Torrent Power Ltd. – [2026] 183 taxmann.com 388 (SC)

Judiciary and Counsel Details

• Sanjay Kumar & K. Vinod Chandran, JJ.
• S. Dwarakanath, A.S.G., Gurmeet Singh Makker, AOR, Sarthak Karol, Digvijay Dam, Ms Divya Jyoti Singh, Raghav Sharma, Rajat Vishnaw, S. Vijay Adithya, Mudit Bansal, Prabhakar Yadav & Abhyudey Kabra, Advs. for the Petitioner.
• V. Lakshmikumaran, Ms Nitum Jain, Ms Neha Choudhary, Ms Medha Sinha, Swastik Mishra, Advs. & Ms Charanya Lakshmikumaran, AOR for the Respondent.

Facts of the Case

The petitioner engaged in electricity generation and distribution, imported natural gas on a CIF (Cost, Insurance, and Freight) basis, and paid IGST and Service Tax on ocean freight under the reverse charge mechanism. It filed refund applications for the taxes paid, which were denied by the authorities, citing lack of jurisdiction and the principle of unjust enrichment, on the ground that the tax burden had been passed on to consumers and was not entitled to refund, with a proposal to transfer the amount to the Consumer Welfare Fund. The High Court held that it was entitled to refund of IGST and Service Tax paid on ocean freight as the levy was declared unconstitutional. The matter was accordingly placed before the Hon’ble Supreme Court.

Supreme Court Held

The Hon’ble Supreme Court held that the High Court was not justified in directing a procedure for refund to consumers directly, which was not contemplated under Section 54 read with Section 57 of the CGST Act. The Court observed that upon receipt of a refund application, the officer is required to satisfy himself that the amount claimed is actually refundable, and if so, it must be credited to the Consumer Welfare Fund. In the instant case, it was an admitted fact that the petitioner had passed on the tax burden to consumers; therefore, the exception did not apply. Consequently, the High Court’s order was set aside, and the petitioner was directed to transfer the amount to the authorities concerned for credit to the Consumer Welfare Fund within three months. The appeal was allowed in favour of the revenue.

List of Cases Reviewed

• Torrent Power Ltd. v. Union of India [2025] 170 taxmann.com 736 (Gujarat)/[2025] 95 GSTL 437 (Gujarat) (Para 11) – Reversed

List of Cases Referred to

• Union of India v. Mohit Minerals Private Limited. (2022) 10 SCC 700 (para 3)
• Mohit Minerals Pvt. Ltd. v. Union of India (2020) 74 GSTR 134 (para 3).