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

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 of original application filing (5.4.2019) under Sections 54 and 56 of GST Act, rejecting respondents' argument that interest should be computed from 60 days after application filing. The court found respondents' withholding of approximately Rs.108 crores for two and a half years unreasonable and unjustified, emphasizing that provisions relating to interest on delayed refund payments are beneficial and non-discriminatory. The impugned order dated 22.12.2021 was partially quashed regarding interest component, and petition was allowed.

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Issues Involved
1. 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 Analysis

Quashing of the Impugned Order
The 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 Amount
The 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 Act
The 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 8.10.2021
The 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 Application
The 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.

Conclusion
The 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.

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