2023 (4) TMI 1182 - HC - GST

Interest on delayed refund - Relevant Date - Refund of ITC - Purchases made during the earlier month - export made during the subsequent months - Date from which statutory interest under Section 56 of the Central Goods and Services Tax Act 2017 - HELD THAT - A careful perusal of the main part of Section 56 would show that if any tax is ordered to be refunded under Section 54(5) of the CGST Act visa-vis an applicant and if the same is not refunded within sixty days from the date of receipt of an application under Section 54(1) interest at such rate not exceeding 6% as has been specified in the notification issued by the Government on the recommendation of the Council is payable immediately after the expiry of sixty (60) days from the date of the receipt of the said application which runs as per the said provision till the date of refund of such tax - the reasons based on which a part of the refund was sought to be denied was that the value of exports for the given month was less than the purchases made in that month. Accordingly for the month of August 2017 the inadmissible amount was pegged at Rs. 59, 67, 280/-; likewise for the month of September 2017 the inadmissible amount was quantified at Rs. 1, 70, 20, 253/-. The petitioner is right in its contention that interest should trigger in accordance with the main part of Section 56 of the CGST Act i.e. from 18.04.2018 and that interest should run both on CGST and DGST up until the date when the amount was remitted to the petitioner. The dates when the remittance was made have been captured. The respondents/revenue will remit the interest to the petitioner in accordance with what is stated hereinabove within two weeks from receipt of a copy of the judgment - Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the court was the determination of the date from which statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act) would be triggered. Specifically, the court needed to decide whether interest should commence from the date of the initial refund application or from 60 days after the court's order directing consideration of the application.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The relevant legal framework is Section 56 of the CGST Act, which deals with interest on delayed refunds. The section specifies that interest is payable if a tax refund is not issued within 60 days from the date of receipt of the application, with the interest rate not exceeding 6% as notified by the government. The proviso to Section 56 allows for a higher interest rate, up to 9%, if the refund arises from an order passed by an adjudicating authority or court and is not refunded within 60 days from the application date.

Court's interpretation and reasoning:

The court interpreted the main part of Section 56 as applicable to the petitioner's case, emphasizing that the proviso serves as an exception and should not disrupt the main provision's intent. The court found that the proviso applies when a refund arises from a lis (dispute) that requires adjudication, which was not the case here.

Key evidence and findings:

The petitioner had filed refund applications for zero-rated supplies (exports) initially on 16.12.2017. The applications were rejected, but later, upon the court's intervention, the refund was granted in full on 24.05.2019. The respondents argued that interest should be calculated from the court's order date, while the petitioner contended it should start from 60 days after the initial application was cured.

Application of law to facts:

The court applied the main part of Section 56, concluding that interest should be calculated from 18.04.2018, which is 60 days after the deficiency in the initial application was cured. The court rejected the respondents' argument that the proviso should apply, as there was no adjudicated dispute (lis) that necessitated invoking the proviso.

Treatment of competing arguments:

The court considered the respondents' argument that the proviso should apply due to the court's involvement in directing the refund process. However, it concluded that the court's orders merely facilitated compliance with the main provision of Section 56, without creating a lis that would trigger the proviso.

Conclusions:

The court concluded that interest should be calculated from 18.04.2018, in line with the main provision of Section 56, and not from the date of the court's order. The respondents were directed to remit the interest accordingly.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The proviso carves out an exception to the main provision, to which it is appended, even while it embraces the field that is covered by the main provision."

Core principles established:

The court established that the main part of Section 56 governs the commencement of interest on delayed refunds unless a specific dispute (lis) arises that requires adjudication, in which case the proviso may apply.

Final determinations on each issue:

The court determined that interest on the petitioner's refund should commence from 18.04.2018, and the respondents were ordered to pay the interest calculated from this date within two weeks of receiving the judgment.

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