Statutory interest on delayed GST refund payable from 60 days after application receipt, not export completion under Section 56

Delhi HC held that statutory interest under Section 56 of CGST Act, 2017 on delayed refund is payable from 60 days after application receipt date, not from export completion date. The petitioner sought ITC refund where purchases were made in earlier months but exports occurred in subsequent months. Revenue partially denied refund claiming monthly export values were less than purchases. Court ruled interest should run from application date plus 60 days until actual refund remittance for both CGST and DGST components. Revenue directed to pay interest within two weeks.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the court was the determination of the date from which statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act) would be triggered. Specifically, the court needed to decide whether interest should commence from the date of the initial refund application or from 60 days after the court's order directing consideration of the application.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The relevant legal framework is Section 56 of the CGST Act, which deals with interest on delayed refunds. The section specifies that interest is payable if a tax refund is not issued within 60 days from the date of receipt of the application, with the interest rate not exceeding 6% as notified by the government. The proviso to Section 56 allows for a higher interest rate, up to 9%, if the refund arises from an order passed by an adjudicating authority or court and is not refunded within 60 days from the application date.

Court's interpretation and reasoning:

The court interpreted the main part of Section 56 as applicable to the petitioner's case, emphasizing that the proviso serves as an exception and should not disrupt the main provision's intent. The court found that the proviso applies when a refund arises from a lis (dispute) that requires adjudication, which was not the case here.

Key evidence and findings:

The petitioner had filed refund applications for zero-rated supplies (exports) initially on 16.12.2017. The applications were rejected, but later, upon the court's intervention, the refund was granted in full on 24.05.2019. The respondents argued that interest should be calculated from the court's order date, while the petitioner contended it should start from 60 days after the initial application was cured.

Application of law to facts:

The court applied the main part of Section 56, concluding that interest should be calculated from 18.04.2018, which is 60 days after the deficiency in the initial application was cured. The court rejected the respondents' argument that the proviso should apply, as there was no adjudicated dispute (lis) that necessitated invoking the proviso.

Treatment of competing arguments:

The court considered the respondents' argument that the proviso should apply due to the court's involvement in directing the refund process. However, it concluded that the court's orders merely facilitated compliance with the main provision of Section 56, without creating a lis that would trigger the proviso.

Conclusions:

The court concluded that interest should be calculated from 18.04.2018, in line with the main provision of Section 56, and not from the date of the court's order. The respondents were directed to remit the interest accordingly.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The proviso carves out an exception to the main provision, to which it is appended, even while it embraces the field that is covered by the main provision."

Core principles established:

The court established that the main part of Section 56 governs the commencement of interest on delayed refunds unless a specific dispute (lis) arises that requires adjudication, in which case the proviso may apply.

Final determinations on each issue:

The court determined that interest on the petitioner's refund should commence from 18.04.2018, and the respondents were ordered to pay the interest calculated from this date within two weeks of receiving the judgment.

---