2024 (12) TMI 216 - HC - GST

Tax authorities must pay statutory interest on refunds despite internal disputes between departments

M/s TATA Aldesa (J.V.) Versus State of UP and 4 others

The HC allowed the petition directing respondent no.3 to pay interest under Section 56 of CGST Act, 2017 within one month. The court held that once refund ... Seeking a direction to the respondents to disburse the amount of refund sanctioned to the petitioner vide refund sanction order dated 12.02.2020 along with interest - HELD THAT:- Once the amount has been refunded in terms of the communication dated 05.04.2024, there are no good reason for not paying the interest in terms of Section 56 of the CGST Act, 2017 to the petitioner by the State authorities. Insofar as the order passed seeking to disown the liability, for whatever reason, the issue is between the State authorities and the CGST authorities which will have to be resolved among them. The petitioner cannot be deprived of the amount of interest on account of the inter se dispute between the authorities. Respondent no.3 is directed to make payment of the amount of interest in terms of Section 56 of the CGST Act, 2017 and in terms of Circular No. 17/17/2017 dated 15.11.2017 as indicated in the communication dated 05.04.2014, to the petitioner, within a period of one month from today - the petition is allowed. Issues:Petitioner seeking direction for refund disbursement with interest under CGST Act, 2017.Analysis:The petitioner filed a writ petition seeking a direction for the disbursement of a refund amount of Rs. 38,10,351 along with interest, as sanctioned in a refund order dated 12.02.2020. Despite the order for refund with interest, the amount was not paid to the petitioner, leading to the petitioner's claim for interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), which mandates interest payment at 6% per annum if the refund is delayed beyond 60 days from the application date. The respondents were directed to pay the interest to the petitioner as per the provisions of the CGST Act, 2017.On 8.11.2024, the learned Standing Counsel for the SGST informed the court that the refund amount had been credited to the petitioner's bank account. However, the petitioner contended that interest was also due as the payment was made beyond the 60-day period from the application date. The petitioner emphasized their entitlement to interest under Section 56 of the CGST Act, 2017, irrespective of any dispute between the state and central authorities regarding liability for interest payment.The Deputy Commissioner, State Tax, Firozabad, disowned liability for interest payment, stating that the CGST authorities were responsible for the interest payment. The petitioner maintained that their right to interest should not be affected by inter-authority disputes and insisted on receiving the interest amount owed to them under the law. The CGST authorities tried to disclaim liability based on a circular, but the court emphasized the petitioner's right to interest as per the CGST Act, 2017.The court, after reviewing relevant communications and circulars, directed respondent no.3 to pay the interest amount to the petitioner within one month, as per Section 56 of the CGST Act, 2017 and Circular No. 17/17/2017 dated 15.11.2017. The court clarified that the resolution of any dispute between state and central authorities should not impact the petitioner's right to receive the interest amount, ensuring the petitioner's entitlement to interest payment was upheld independently of any inter-authority disagreements.