2023 (2) TMI 815 - HC - GST

GST refund interest must be paid from original application date not 60 days later under Sections 54 and 56

SBI Cards & Payment Services Limited Versus Union Of India & Others

Punjab and Haryana HC ruled in favor of petitioner seeking interest on delayed GST refund. The court held that respondents must pay interest from the date ... Interest on delayed refund - Excess amount of CGST / SGST deposited during the initial face of GST - Relevant date for Interest to be computed - From 60 days of the filing of the original application or from the date of fresh application - Refund granted as per the direction of HC - HELD THAT:- Section 54 and 56 of the Act mandates the payment of interest from the date of application whereas the plea of the respondents about the period in which the application for payment of interest was made and the same has been processed within 60 days, hence the petitioner is not liable for the interest is not tenable as the respondents in any case, does not suffer any loss as money lain with the respondents for the continuous period of two and a half years, in fact even before the date of filing of the application for a refund under Section 56 of the Act and the time taken for a refund of the money in terms of the judgment dated 8/10/2021 is unreasonable. The petitioner was entitled to a refund as well as interest amount vide judgment dated 8.10.2021, wherein a specific direction was issued for a refund of Rs.108 crores approximately which was deposited by the petitioner towards CGST+SGST along with applicable interest within one month. Unfortunately, this has not been done and the respondents have no justification for withholding the interest amount, which is a negligent act on the part of the respondents. The Government cannot deprive the petitioner from entitlement of the interest. Therefore, this inaction is wholly unjustified and has deprived the petitioner where the petitioner could have earned interest during this period but because of the withholding, this could not be done. The position of law is well settled and the provisions relating to interest on delayed payment of refund have been consistently held as beneficial and non-discriminatory. 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 matters should also meet the test of the constitutionality and the respondents were not able to explain in any manner the issue of delay in their reply as raised by the petitioner and the chart indicating the delay referred to above speaks for itself. The Impugned order dated 22.12.2021 (Annexure P-1) is hereby partially quashed qua interest part vide which the claim of interest has been rejected and respondents are liable to pay applicable interest in terms of Annexure P-3 annexed with writ petition, from the date of filing of the original application, i.e. 5.4.2019 - Petition allowed. Issues Involved1. Quashing of the impugned order rejecting the claim of interest.2. Entitlement to interest on the refunded amount.3. Interpretation and application of Section 56 of the Central Goods and Services Tax Act, 2017.4. Compliance with the judgment dated 8.10.2021 directing refund with interest.5. Calculation of interest from the date of the original application.Detailed AnalysisQuashing of the Impugned OrderThe petitioner filed a writ petition under Article 226 of the Constitution of India seeking a writ of Certiorari to quash the impugned order dated 22.12.2021, which rejected the claim of interest amounting to Rs. 15,68,26,554/- on Rs. 108.41 crores. The petitioner also sought a writ of mandamus directing the respondents to sanction the interest claim of Rs. 16,91,23,181/- as per the applicable rates under Section 56 of the Central Goods and Services Tax Act, 2017.Entitlement to Interest on the Refunded AmountThe petitioner initially paid Rs. 108.41 crores as CGST and SGST for the period from April 2018 to December 2018, treating the transactions as intra-State sales. Later, it was discovered that these transactions were inter-State, prompting the petitioner to apply for a refund. The refund was initially rejected but was later allowed by the Court on 8.10.2021, directing the respondents to refund the amount along with applicable interest within one month. However, the respondents rejected the interest claim, leading to the present writ petition.Interpretation and Application of Section 56 of the CGST ActThe petitioner argued that under Section 56 of the Act, interest is payable after 60 days from the date of the original refund application, i.e., 5.4.2019. The respondents contended that interest should be calculated from 28.10.2021, the date on which the petitioner filed an online refund application following the Court's order. The Court observed that Section 56 mandates interest payment from the date of the original application, supporting the petitioner's argument.Compliance with the Judgment Dated 8.10.2021The Court had previously ordered a refund of Rs. 108.41 crores along with applicable interest. Despite this, the respondents only refunded the principal amount and rejected the interest claim. The Court noted that the money had been lying with the respondents for 2½ years and that the petitioner was entitled to interest as per the judgment dated 8.10.2021.Calculation of Interest from the Date of the Original ApplicationThe Court referred to the judgment in Ranbaxy Laboratories Ltd. Vs. Union of India, which supports the petitioner's claim for interest from the date of the original application. The Court found that the respondents' interpretation of the interest calculation period was untenable. The Court directed that interest should be calculated from 5.4.2019, the date of the original refund application.ConclusionThe Court allowed the writ petition, partially quashing the impugned order dated 22.12.2021 concerning the rejection of the interest claim. The respondents were directed to pay the applicable interest from the date of the original application, 5.4.2019, and to calculate and pay the requisite interest amount within two months from the receipt of the certified copy of the order. The Court emphasized that the petitioner was entitled to the interest as per the earlier judgment and that the respondents' delay was unjustified.