2022 (5) TMI 347 - HC - GST

Taxpayer entitled to interest on delayed GST refund despite department's erroneous payment classification under Section 56

M/s Alok Traders Versus Commissioner Commercial Taxes And 2 Others

The Allahabad HC held that the petitioner was entitled to interest on delayed GST refund under Section 56 of the CGST Act. The tax department erroneously ... Entitlement of interest on refund - whether under the facts and circumstances, the petitioner is entitled for interest on the amount which was liable to be refunded in terms of the order of the First Appellate Authority dated 30.06.2018 but it was refunded on 04.04.2022 - Sections 54 and 56 of the C.G.S.T. Act and Rule 89 of the C.G.S.T. Rules - HELD THAT:- As per provisions of Section 54(1) of the CGST Act, 2017, the petitioner could claim refund by making an application before the expiry of two years from the relevant date in such form and manner as may be prescribed. The relevant date for the purposes of the present case is referable to Explanation 2(d) appended to Section 54 which provides that in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction. It is undisputed that the proper office while accepting the deposit of tax and penalty by bank-draft from the petitioner for Rs.4,70,400/- for release of goods pursuant to the order dated 30.12.2017 under Section 129 (3) of the U.P. Goods and Service Tax Act, 2017, mistakenly shown the deposit under the aforesaid Act instead of IGST Act and further committed a manifest error whether deliberately or otherwise, to deposit the aforesaid amount by creating a temporary ID at its own, without informing any relevant fact or password etc. to the petitioner. Therefore, it was wholly impossible for the petitioner to apply online for refund under Section 54(1) of the Act read with Rule 89 of the Rules. It is well settled that law does not compel a man to do what he cannot possibly perform. Under the circumstances, the petitioner admittedly moved a refund application dated 09.07.2018 in physical form for refund of the aforesaid amount pursuant to appellate order dated 30.06.2018 and also enclosed a copy of the appellate order along with the refund application. As per own admitted case of the respondents, they themselves firstly proceeded arbitrarily and deposited the amount received from the petitioner, by creating a temporary ID and did not give access to the petitioner to the said ID and even the said temporary ID was not available at the end of the proper officer’s login and its password was not provided to the petitioner as per own stand taken by the respondents in the afore-quoted paragraph-16 of the personal affidavit dated 25.04.2022. Under the circumstances, when the appellate authority vide order dated 30.06.2018 directed for refund and the order was communicated to the respondents by the petitioner vide letter dated 09.07.2018, then, the respondents were bound to refund the amount along with interest under Section 56 of the CGST/ U.P. GST Act, 2017 but on one hand, they arbitrarily withheld the refund of the petitioner for more than 33 months and on the other hand, they again arbitrarily acted and have not granted interest to the petitioner on the delayed refund of the amount in question. The principal amount deposited was refunded by the respondents to the petitioner only on 04.04.2022. Thus, the petitioner is entitled for interest under Section 56 of the Act, 2017. In the present set of facts, the respondents have committed wrong firstly by not showing the deposit under IGST Act, secondly by showing the deposit by creating temporary ID at its own and thirdly, not informing the petitioner the password for the temporary ID so created, to enable him to apply in the prescribed form. The Respondent No.1 in paragraphs-16, 17 and 18 of her personal affidavit dated 25.04.2022 (aforequoted) has herself stated that due to technical glitches, the temporary I.D. of the petitioner was not available at the end of proper officer’s login as it was at development stage of GST Portal and hence it was not possible to provide the password to the petitioner from the proper officer’s end - the respondents arbitrarily and illegally withheld the amount of refund despite the order of the first appellate authority dated 30.06.2018 for refund. It is well settled that “construction which permits one to take advantage of one's own wrong or to impair one's own objections under a Statute should be disregarded. The interpretation should as far as possible be beneficial in the sense that it should suppress the mischief and advance the remedy without doing violence to the language” - the respondents cannot be allowed to take advantage of their own wrong so as to deny the payment of interest to the petitioner on delayed refund. The respondents are directed to pay interest to the petitioner within a month from today, for the period from 09.09.2018 to 31.03.2022, at the rate notified under Section 56 of the Act - Petition allowed. Issues Involved:1. Refund of security deposit under Section 129(1) of the U.P. Goods and Service Tax Act, 2017.2. Provision of temporary ID and password for filing an online application under Rule 89 of the U.P. Goods and Service Tax Rules, 2017.3. Entitlement to interest on the delayed refund.Issue-Wise Detailed Analysis:1. Refund of Security DepositThe petitioner, a registered dealer dealing in tobacco, had his goods intercepted and detained by the Assistant Commissioner, Mobile Squad Unit-5, State Tax, Jhansi. An order dated 30.12.2017 under Section 129(3) of the U.P. Goods and Service Tax Act, 2017, demanded tax and penalty totaling Rs.4,70,400/- for the release of the goods. The petitioner complied by depositing the amount via bank draft. The petitioner appealed this order, and the appellate authority set it aside on 30.06.2018, directing a refund. Despite several applications and reminders from the petitioner, the refund was not processed until the court intervened. The court noted that the respondents had arbitrarily created a temporary ID for the petitioner and failed to provide the necessary password, making it impossible for the petitioner to file the refund application online.2. Provision of Temporary ID and PasswordThe petitioner requested the provision of a temporary ID and password to file the required online application under Rule 89 of the U.P. Goods and Service Tax Rules, 2017. The respondents failed to provide this, citing technical glitches and the developmental stage of the GST Portal. The court found that the respondents had created a temporary ID without informing the petitioner of the password, thereby obstructing his ability to apply for the refund online. The court held that the respondents' actions were arbitrary and mischievous, as they did not facilitate the refund process despite the appellate order.3. Entitlement to Interest on Delayed RefundThe court examined Sections 54 and 56 of the C.G.S.T. Act and Rule 89 of the C.G.S.T. Rules, which govern the refund process and the payment of interest on delayed refunds. The petitioner applied for a refund on 09.07.2018, but the refund was processed only on 04.04.2022. The court noted that the respondents had withheld the refund for over 33 months without any valid reason. As per Section 56, interest is payable if the refund is not processed within 60 days from the date of application. The court directed the respondents to pay interest to the petitioner from 09.09.2018 to 31.03.2022 at the rate notified under Section 56 of the Act.Conclusion:The court allowed both writ petitions, directing the respondents to pay interest on the delayed refund within a month from the date of the judgment. The court emphasized that the respondents' arbitrary actions and failure to provide the necessary temporary ID and password had caused undue delay and harassment to the petitioner. The judgment underscores the importance of adhering to statutory provisions and ensuring timely refunds to taxpayers.