TaxTMI 
TaxTMI 
2026 (7) TMI 1433
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....ing and setting aside the order dated 17.06.2025, passed in FORM-GST-RFD-06 by the respondent No. 2, rejecting the refund claim of the excess payment of interest. 3. Learned advocate Mr. Uchit Sheth, appearing for the petitioner has submitted that despite the petitioner having pointed out the judgement of this Court rendered in the case of Arya Cotton Industries and Anr. vs. Union of India and anr., (2024) 130 GSTR 81, respondent No. 2 has passed the impugned order. It is submitted that subsequently, in view of the judgement passed by this Court, a Proviso to Rule 88B of the Central Goods and Services Tax Rules, 2017 (for short "CGST Rules") has been introduced, which also finds to be in favour of the petitioner however, the respondents ....
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....s is prospective in nature and hence, the refund application of the petitioner for the period prior to amendment deserves to be rejected. The petitioner again responded on 16.06.2025, pointing out the order of this Court and reiterating his request however, the respondent No. 2 passed the order dated 17.06.2025, rejecting the refund application by holding that amendment to Rule 88B of the CGST Rules is prospective in nature. The same is impugned in the present writ petition. 6. Learned advocate Mr. Uchit Sheth, while pointing out the Minutes of 53rd meeting of the GST Council, held on 22.06.2024, has submitted that the amendment to Rule 88B of the CGST Rules by introducing the Proviso thereunder was, in fact, made pursuant to the decisio....
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....t in the case of Arya Cotton Industries and anr. (supra) are as under: "12. As per the above explanation, the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in electronic cash ledger. Therefore, when the return is filed by the assessee in Form GSTR-3B and if there is sufficient balance available in the electronic cash ledger, than liability as per the return is simply offset against such balance by debit in electronic cash ledger. Hence, the tax paid at the time of deposit into electronic cash ledger which is adjusted against liability at the time of filing of return is merely setting off of the amount from electronic cash ledger to be utilised for payment of tax lia....
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....that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. If the mechanical and literal interpretation is done by the respondent is accepted, the same would convert the interest into the nature of penalty. It appears that for the purpose of introduction of the proviso to Section 50(1), is with regard to remove the controversy which earlier existed as to whether interest is leviable on gross tax liability without considering admissible input tax credit or whether it was only applicable on net tax liability paid by the taxable person. The GST Counsel in his 31st meeting....
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....which was inserted vide Notification No.12/2024 dated 10.07.2024, with effect from 10.07.2024. 11. The Proviso to Rule 88B of the CGST Rules reads as under: "Provided that where any amount has been credited in the Electronic Cash Ledger as per provisions of subsection (1) of section 49 on or before the due date of filing the said return, but is debited from the said ledger for payment of tax while filing the said return after the due date, the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return." 12. Thus, the respondent, though have not denied that the case of the petitioner i....