2019 (7) TMI 1282 - HC - GST

Gujarat HC grants 9% annual simple interest on delayed IGST refund under Section 16 of IGST Act 2017

M/s SARAF NATURAL STONE Versus UNION OF INDIA

Gujarat HC held that writ applicants were entitled to 9% per annum simple interest on delayed IGST refund payments under Section 16 of IGST Act, 2017. The ... Delay in grant of refund - compensation and interest towards the substantial delay in making payment of the refund of the Integrated Tax paid on the export of goods - Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017 - whether the writ applicants are entitled to seek compensation along with the interest for the delayed refund? HELD THAT:- The position of law appears to be well settled. The provisions relating to an interest of delayed payment of refund have been consistently held as beneficial and nondiscriminatory. It is true that in the taxing statute the principles of equity may have little role to play, but at the same time, any statute in taxation matter should also meet with the test of constitutional provision - The respondents have not explained in any manner the issue of delay as raised by the writ applicants by filing any reply. The respondents are liable to pay simple interest on the delayed payment at the rate of 9% per annum - On the aggregate amount of refund, the writ applicants are entitled to 9% per annum interest from the date of filing of the GSTR03. The respondents shall undertake this exercise at the earliest and calculate the requisite amount towards the interest - application disposed off. Issues Involved:1. Compensation and interest for delayed refund of integrated tax paid on export of goods.2. Legal provisions and procedural compliance under IGST Act, CGST Act, and related rules.3. Constitutional validity and equity in taxation matters.Issue-wise Detailed Analysis:1. Compensation and Interest for Delayed Refund of Integrated Tax Paid on Export of Goods:The writ applicants sought compensation and interest for the delay in the refund of integrated tax paid on exported goods under Section 16 of the IGST Act, 2017 and related provisions of the CGST Act, 2017. The applicants argued that the delay in refund was arbitrary and violated Articles 14 and 19 of the Constitution of India, severely impacting their working capital and business continuity. The respondents opposed the application, stating that there was no specific provision for interest on the refund in the absence of an express statutory provision.2. Legal Provisions and Procedural Compliance Under IGST Act, CGST Act, and Related Rules:The court examined several provisions under the IGST Act and CGST Act:- Section 16 of the IGST Act: Defines zero-rated supply, allowing registered persons exporting goods to claim a refund of either unutilized input tax credit or integrated tax paid.- Section 54 of the CGST Act: Outlines the procedure for claiming refunds, including provisional refunds within 7 days and final settlement within 60 days.- Rule 91 and Rule 96 of the CGST Rules: Detail the process for provisional refunds and refunds of integrated tax paid on exported goods.- Section 56 of the CGST Act: Mandates interest on delayed refunds if not processed within 60 days from the application date, with the interest rate specified by government notifications.- Rule 94 of the CGST Rules: Requires the proper officer to sanction interest on delayed refunds suo motu.3. Constitutional Validity and Equity in Taxation Matters:The court referenced several judgments to support the principle that interest on delayed refunds is a compensatory measure and not merely a statutory right. Notable cases included:- Shiv Kumar Jain Vs. Union of India: Held that unreasonable delay in refunds is a violation of Article 300A of the Constitution.- K.T. Plantation Pvt. Ltd. & Anr. Vs. State of Karnataka: Affirmed the right to compensation for deprivation of property under Article 300A.- State of Gujarat Vs. Doshi Printing Press: Emphasized that interest on delayed refunds is a compensatory measure.Conclusion:The court concluded that the respondents were liable to pay simple interest at the rate of 9% per annum on the delayed refund amount. The interest was to be calculated from the date of filing the GSTR-3 form. The respondents were directed to complete the calculation and payment of interest within two months from the receipt of the court order. The writ application was disposed of accordingly.