Dealer wins IGST refund case despite Revenue challenge under Section 54 GST Act with modified interest rate

The Madras HC dismissed Revenue's writ appeals challenging refund of excess IGST paid under Section 54 of GST Act, 2017. The dealer paid 18% ITC against 5% output tax, creating excess eligible for refund despite Revenue's argument that voluntary overpayment shouldn't qualify. The court upheld the refund principle where ITC exceeds output tax, confirming dealer's entitlement. However, the HC modified the interest rate from 9% to 6% per annum, payable after sixty days from the Original Authority's order date, applying the statutory maximum rate under GST provisions.

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Issues:
- Interpretation of Section 54 of the Goods and Services Tax Act, 2017 regarding refund entitlement.
- Validity of interest rate of 9% awarded by the writ Court for the refund.

Analysis:
The judgment by the Madras High Court involved appeals against a common order concerning the entitlement of a dealer to a refund under the GST Act. The dealer had paid higher IGST than required due to the supplier's error, leading to a claim for refund under Section 54 of the Act. The Appellate Authority had allowed the dealer's appeal, prompting the Revenue to challenge the decision in writ petitions. The writ Court upheld the dealer's entitlement to the refund under Sections 54(3)(ii), 54(5), 54(6), and 54(7) of the GST Act. Additionally, the writ Court awarded 9% interest per annum for the refund, which was contested by the Revenue in the appeals.

The Revenue argued that the dealer should not be entitled to a refund as the excess payment made by the supplier was not a valid basis for refund under the Act. They also contended that the interest rate of 9% awarded by the writ Court exceeded the maximum permissible rate of 6% as per the relevant notification. The dealer, on the other hand, acknowledged that the interest rate should be limited to 6% in line with the Act and the notification.

The High Court analyzed the provisions of Section 54 of the GST Act, emphasizing that a dealer is entitled to a refund when the input tax paid exceeds the output tax. The Court rejected the Revenue's argument that the excess payment by the supplier should not benefit the dealer, stating that the legislative intent was to rectify instances where excess tax was collected. As the output tax was lower than the input tax in this case, the dealer was deemed eligible for the refund.

Regarding the interest rate, the Court agreed with the Revenue that the 9% rate awarded by the writ Court exceeded the prescribed maximum of 6%. The Court clarified that the interest calculation should start from the expiry of sixty days from the Original Authority's order, with the maximum rate being 6%. Consequently, the Court modified the interest rate to 6% from the specified date, upholding the rest of the writ Court's decision. The appeals were dismissed with the modified order, adjusting the interest rate but maintaining the refund entitlement.

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