2022 (8) TMI 213 - HC - GST

Claim of interest on delayed Refund - the only reason the respondents/revenue have denied grant of statutory interest to the petitioner is because Covid-19 was raging and there was delay in processing the petitioner s refund - Section 56 of the Central Goods and Services Tax Act 2017 - HELD THAT - What has emerged from the record and something which is not disputed is that the petitioner did file an application for refund on 20.07.2021 the principal amount towards refund was released in two tranches; first one amounting to Rs.14, 22, 482/- was released in and about 04.01.2022 and the second tranche amounting Rs.11, 07, 462/- was released in and about 22.03.2022. The statutory rate of interest is pegged at 6%. The said interest gets triggered after the expiry of 60 days from the date of receipt of application for refund. The interest is payable to the petitioner. The respondents/revenue are directed to pay to the petitioner at the statutory rate as prescribed in Section 56 of the Act - the statutory rate of interest provided under Section 56 of the Act is a compensation for use of money. The writ petition is disposed of.

Summary

Issues:
1. Payment of statutory interest on refund amount.

Analysis:
The High Court addressed the issue of payment of statutory interest on a refund amount in this judgment. The petitioner had filed an application for refund, and while the principal amount had been refunded in two tranches, the statutory interest remained unpaid. The respondents/revenue argued that the delay in processing the refund due to Covid-19 justified the denial of interest. However, the petitioner contended that the refund application was filed timely, and the refund was processed in stages, necessitating the payment of statutory interest as per Section 56 of the Central Goods and Services Tax Act, 2017.

The Court examined the arguments presented by both parties and found merit in the petitioner's claim. It noted that the principal amount had been refunded in two tranches, and the respondents/revenue were obligated to pay the statutory interest at a rate of 6% as per the provisions of Section 56 of the Act. The Court emphasized that the statutory interest served as compensation for the use of the money withheld beyond the prescribed period and directed the respondents/revenue to pay the interest to the petitioner.

The Court dismissed the respondents' argument that the limitation period was extended due to Covid-19 related delays, stating that such reasoning did not apply to the issue of interest payment on delayed refunds. It clarified that the orders cited by the respondents did not address the specific issue of interest on delayed refunds. Ultimately, the Court held that the interest was payable to the petitioner, and the respondents were instructed to take necessary steps to ensure the payment of interest at the statutory rate.

In conclusion, the Court disposed of the writ petition by directing the respondents to pay the statutory interest to the petitioner and set a compliance date for further action. The judgment highlighted the importance of adhering to statutory provisions regarding interest payments on delayed refunds and underscored the compensatory nature of such interest rates as per the relevant legal framework.