2025 (7) TMI 549 - HC - GST

Review petition for refund with interest dismissed as not maintainable, no apparent error found

MATRIX CELLULAR (INTERNATIONAL) SERVICES PVT LTD Versus THE PRINCIPAL COMMISSIONER STATE TAX DELHI & ANR.

Delhi HC dismissed a review petition seeking refund with interest, ruling no error or apparent mistake existed on the face of the record. The court held ... Seeking review of judgement - error or apparent mistake on the face of the record - refund with interest - HELD THAT:- In the opinion of this Court, there is no error or apparent mistake on the face of the record. Therefore, the present review petition is not maintainable and hence, does not deserve to be considered on merits. The present review petition is disposed of. The core legal questions considered in this judgment are:(i) Whether the petitioner is entitled to a refund of the amount deposited;(ii) If entitled, what amount of refund is due;(iii) Whether interest is payable on the refund amount, and if so, for what period and at what rate;(iv) Whether the review petition challenging the earlier judgment refusing interest for a certain period is maintainable.Issue-wise Detailed Analysis1. Entitlement to Refund and AmountThe Court examined the procedural framework under the Central Goods and Services Tax Rules, 2017 (CGST Rules), particularly Rules 89, 90, and 93, which govern the refund application process. Rule 89 mandates filing a refund application; Rule 90 requires the proper officer to scrutinize and issue an acknowledgment within 15 days or raise a deficiency memo if documents or information are lacking; Rule 93 deals with further proceedings if deficiencies are not cured.In the present case, the petitioner had inadvertently deposited the amount between August 2017 and January 2018 and filed the refund application on 12th April 2018. The deficiency memo was only issued on 3rd March 2020, which was significantly delayed beyond the prescribed 15-day period. The petitioner subsequently withdrew the refund application on 17th March 2020 but followed up with the department thereafter, with the first written communication after the pandemic lockdown being on 29th August 2023.The Court found that the department had not adhered to the statutory timelines, and the amount could no longer be retained by the department. The Court held that the petitioner is entitled to refund of Rs. 3,39,79,974/-.2. Interest Payable on RefundThe Court relied heavily on its earlier decision in a related case, which interpreted Section 56 of the CGST Act. The Court clarified the dual rate structure for interest on delayed refunds:6% per annum interest is payable from the date immediately after the expiry of 60 days from the date of the initial refund application under Section 54(1) of the CGST Act;9% per annum interest applies from the date immediately after the expiry of 60 days from the date of a subsequent refund application filed pursuant to appellate orders that uphold the refund claim.The Court emphasized that the higher 9% rate applies only when the refund claim is subject to appellate proceedings and a subsequent application is filed after finality of such orders.Applying these principles, the Court held that interest at 6% per annum was payable from 11th June 2018 (60 days after the refund application dated 12th April 2018) till 2nd March 2020, and again from 29th August 2023 till 20th May 2025 (date of judgment). No interest was payable for the intervening period from 3rd March 2020 to 28th August 2023 because the petitioner had withdrawn the refund application, and there was no written communication during this period, including the Covid-19 pandemic lockdown.The Court further directed that if the department fails to credit the refund amount along with interest by 30th May 2025, interest at 18% per annum would be payable from 1st June 2025 onward.3. Maintainability of Review PetitionThe petitioner filed the present review petition under Section 114 of the Code of Civil Procedure, 1908, seeking interest for the period 3rd March 2020 to 28th August 2023, which was denied in the impugned judgment.The Court found no error or apparent mistake on the face of the record in the earlier judgment and held that the review petition was not maintainable. The Court reiterated that the denial of interest for the said period was justified due to the withdrawal of the refund application and lack of communication from the petitioner during that time.Significant HoldingsThe Court's key legal reasoning includes the following verbatim excerpts:'31. It is important to note that the rate of interest as specified in the main provision of Section 56 of the CGST Act and the proviso to Section 56 of the CGST Act is materially different. Whereas, the main provision of Section 56 of the CGST Act provides for an interest at the rate not exceeding 6% per annum, the proviso to Section 56 of the CGST Act stipulates interest at the rate not exceeding 9% per annum.''33. It is clear from a plain reading of Section 56 of the CGST Act that whereas the main provision of Section 56 of the CGST Act refers to the rate of interest applicable on the amount of refund due, which remains unpaid even after sixty days from the date of application for refund; the proviso provides for an increased rate of interest for the period that commences from the date immediately after the expiry of sixty days from the date of application which is filed pursuant to the claim for refund attaining finality in appellate proceedings.''...the proviso merely enhances the interest payable to a person for the period commencing from the date immediately after sixty days from the date of his application filed pursuant to its entitlement to refund claim attaining finality.''...the amount would be liable to be refunded and cannot be enjoyed by the Department in this manner.''...if the Department does not credit with the said amount to the bank account of the Petitioner, interest would be liable to be paid @18% per annum from 1st June 2025.'The Court established the core principle that adherence to statutory timelines by the department is critical to the efficacy of the refund scheme under the CGST Act. Failure to comply with these timelines entitles the applicant to interest at the prescribed rates.On the issue of interest, the Court clarified the distinction between the two rates under Section 56 and their application depending on whether the refund application is initial or consequent to appellate orders.Finally, the Court confirmed that a review petition under Section 114 CPC is not maintainable in the absence of an error apparent on the face of the record, particularly where the earlier judgment's reasoning is sound and supported by law and facts.