Interest at 6% ordered on delayed CGST and IGST refund disbursal for prolonged post-sanction payment gap under Section 56

HC held that the taxpayer was entitled to interest on delayed refund of CGST and IGST already sanctioned but not timely disbursed. Relying on the principle that interest is compensatory for being deprived of money lawfully due, HC found inordinate delay between the refund sanction order dated 04.10.2021 and actual payment on 27.04.2023. Allowing 26 days for administrative compliance, HC directed the authorities to pay interest at 6% per annum on Rs. 68,37,488 for the period from 01.11.2021 to 27.04.2023, to be paid before 31.05.2023.

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Issues:
The issues involved in the present case are the claim for interest on a refunded amount, specifically focusing on the delay in processing the refund of Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST), and the applicable rate of interest.

Interest Claim and Refund Processing:
The petitioner filed a petition seeking interest on an amount refunded. The refund included SGST, CGST, and IGST components. While SGST refund was processed and disbursed, CGST and IGST refunds were delayed despite the sanction order. The petitioner claimed interest on the delayed amounts. After the petition was filed, the concerned authorities disbursed the sanctioned refund. The issue now pertains to the interest payable on the refunded amount.

Interest Components and Appeal:
The petitioner claimed two components of interest: one for the period before the refund order and the other for the delayed payment post the order. The petitioner decided not to press for interest before the refund order date as an appeal on this matter is pending. However, they requested expedited processing of the appeal.

Court's Decision on Interest:
The Court acknowledged the delay in refund disbursement and expressed a view that interest should be payable. Referring to legal precedents, the Court emphasized that interest serves as compensation for deprivation of funds. The Court ruled in favor of the petitioner, awarding interest on the refunded amount from a specified date until the payment date.

Rate of Interest and Disposition:
The Court considered the compensatory nature of interest and noted the statutory rate of 6% per annum. While the petitioner suggested a flexible rate, the Court upheld the 6% rate due to statutory provisions. The judgment directed the respondents to pay the interest promptly and adjudicate on the appeal for additional interest prior to the refund order date. The petition was disposed of with these directives.

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