2023 (7) TMI 533 - HC - GST

Exporter entitled to interest on delayed IGST refunds under Section 56 after six months unreasonable withholding

Gujarat HC held that petitioner was entitled to interest on delayed IGST refunds under Section 56 of Central Goods and Services Tax Act, 2017. The refund ... Interest on delayed refunds under the CGST regime - Entitlement to refund of IGST on export of goods - Mandatory timeline for provisional and final refund under Section 54 - Application of Section 56 for payment of interest on delayed refundsApplication of Section 56 for payment of interest on delayed refunds - Interest on delayed refunds under the CGST regime - Petitioner is entitled to interest on delayed refund in terms of Section 56 of the Central Goods and Services Tax Act, 2017. - HELD THAT: - Section 56 prescribes payment of interest where a refund ordered under the refund provisions is not made within sixty days from receipt of the application; the rate is to be specified by notification. The Court construed Section 56 as a clear and mandatory provision entitling the applicant to interest from the day immediately after expiry of sixty days until the date of refund. Reliance on the reasoning in Ranbaxy Laboratories Ltd. (construing a comparable provision in an earlier tax statute) was noted to underline that interest becomes payable on expiry of the statutory period and that ancillary explanations concerning appellate orders do not postpone the date from which interest runs. The respondent had released most refunds during the pendency of the petition but withheld interest; the Court held that failure to pay interest is contrary to Section 56 and that the petitioner is therefore entitled to interest on the delayed refund(s). [Paras 11, 14]Interest on the delayed refund is payable to the petitioner as per Section 56 of the CGST Act.Entitlement to refund of IGST on export of goods - Mandatory timeline for provisional and final refund under Section 54 - Respondent authority was directed to release the remaining withheld refund relating to the specified shipping bill and to grant interest on delayed refunds as provided by law. - HELD THAT: - The petition challenged non-sanctioning and withholding of the IGST refund and tagging of the petitioner as a 'Risky Exporter'. During proceedings, all refunds except the one relating to Shipping Bill No.8723678 dated 17.02.2021 were released. Having found that the statutory regime requires refund processing within the timelines in Section 54 and interest under Section 56 where timelines are breached, the Court directed the concerned respondent authority to release the outstanding refund for the identified shipping bill and to grant interest on delayed refunds in accordance with law. The Court recorded that the pending refund was under process but nevertheless issued a specific direction for release and payment of interest. [Paras 5, 8, 15]The respondent is directed to release the refund for the identified shipping bill and to grant interest on delayed refunds in accordance with the CGST Act.Final Conclusion: Writ petition disposed: respondent directed to release the remaining IGST refund (Shipping Bill No.8723678 dated 17.02.2021) and to pay interest on delayed refunds as mandated by Section 56 of the Central Goods and Services Tax Act, 2017; rule made absolute to that extent. Issues Involved:1. Inaction on sanctioning refund claims of Integrated Goods and Service Tax (IGST) paid on export of goods and duty drawback.2. Eligibility for interest on delayed refund amounts.Summary:Issue 1: Inaction on sanctioning refund claims of IGST and duty drawbackThe petitioner filed a petition under Article 226 of the Constitution of India seeking a writ of Mandamus directing the respondents to sanction the refund claim of IGST paid on export of goods and duty drawback. The petitioner availed input tax credit as per the CGST Act, 2017, and filed FORM GSTR-1 and FORM GSTR-3B, paying the IGST amount. Despite this, the refund was not sanctioned, and the petitioner lodged a grievance at the Centralized Public Grievance Redress and Monitoring System, which was closed without granting the refund. The petitioner was later categorized as a 'Risky Exporter' without any reason, and the refund was withheld for almost six months. The respondents cited an email from Customs Headquarters directing the suspension of the refund scroll, which led to the suspension of the petitioner's refund.Issue 2: Eligibility for interest on delayed refund amountsDuring the pendency of the petition, the petitioner received refunds except for the one involved in Shipping Bill No.8723678 dated 17.02.2021. The petitioner claimed entitlement to interest on the delayed refunds under Section 56 of the CGST Act, 2017, which mandates interest if the refund is not sanctioned within 60 days from the date of receipt of the application. The respondent argued that the refund was under process and would be issued soon. The court referred to the Supreme Court's decision in Ranbaxi Laboratories Ltd. Vs. Union of India, which clarified that interest becomes payable if the refund is not processed within the stipulated period.Judgment:The court concluded that the provisions of Section 56 of the CGST Act, 2017, are clear and unambiguous, entitling the petitioner to claim interest on delayed refunds. The court directed the respondent authority to release the refund involved in Shipping Bill No.8723678 dated 17.02.2021 and grant interest on the delayed refunds as per the provisions of law. The petition was disposed of with these directions, and the rule was made absolute to the aforesaid extent.