TMI Blog2023 (11) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... refund attaining finality in appellate proceedings. Section 56 of the CGST Act, thus, works as follows. The applicant claiming a refund is entitled to interest at the rate of 6% per annum from a date immediately after the expiry of sixty days from making an application under Section 54(1) of the CGST Act. However, if a person s claim is denied (or if granted is not accepted by the Revenue) and the order of the Adjudicating Authority is carried in appeal to the Appellate Authority or to the Appellate Tribunal/High Court, which finally upholds the claim, the applicant may have to file a second application to secure the refund - 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. Once an application for refund under Section 54(1) of the CGST Act has been filed, the same requires to be carried to its logical conclusion. If the said claim is denied by the Adjudicating Authority and the applicant prevails before the Appellate Authority, the order of the Appellate Authority is required to be implemented. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act ) commences from the date immediately after expiry of sixty days from the receipt of an application for refund or from a later date, in case the refund is initially denied but subsequently allowed by the Appellate Authority, Appellate Tribunal, or a court. 4. Briefly stated, the context in which the aforesaid controversy arises is as under: 4.1. The petitioner (Arun Bansal) carries on business of export of goods in the name of its proprietorship concern, Bansal International. On 06.02.2020, the petitioner filed an application claiming a refund of Input Tax Credit (hereafter ITC ) of ₹53,92,516/- (₹8,62,883/- Central GST, ₹8,62,883/- Delhi GST and ₹36,66,750/- Cess) in respect of goods exported without payment of tax in the month of November, 2019. 4.2. The petitioner s application for the refund was acknowledged on 30.07.2020 and on the same date, the concerned officer issued a Show Cause Notice (in form RFD-08) proposing to reject the petitioner s application for a refund on the ground that his claim was wrongful. Thereafter, the concerned officer passed an order dated 10.11.2020 sanctioning a refund of ₹1,08,293/- but rejecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioning a refund of balance amount of ₹52,84,223/-. However, the Adjudicating Authority did not sanction any amount on account of interest on the said amount. Thus, the petitioner s claim for refund was allowed in entirety but interest on the said amount was denied. 4.7. The amount of ₹52,84,223/- was credited into the petitioner s account on 03.01.2023. The petitioner once again filed an application on 16.05.2023 claiming an interest of ₹13,12,761/- computed at the rate of 9% per annum on refund already granted (Central GST = ₹2,09,120/, Delhi GST = ₹2,09,120/- and Cess = ₹8,94,521/-). The said application was rejected by the impugned order. 5. The petitioner has filed the present petition, inter alia, assailing the impugned order dated 11.07.2023 as well as the order dated 28.12.2022. The petitioner also impugns orders allocating the jurisdiction to the Additional/Special Commissioner to act as an Appellate Authority. However, the petitioner had confined the present petition to the denial of its claim of interest on the refund pertaining to the tax period, November, 2019. 6. At the outset, it would be relevant to refer to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed to establish that a refund is due to the applicant and such documentary or other evidence to establish that the incidence of tax and interest claimed has not been passed on to any other person. Sub-section (1) and Sub-section (4) of Section 54 of the CGST Act are relevant and are set out below: 54. Refund of tax. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed. ** ** ** ** ** (4) The application shall be accompanied by- (a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and (b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010 and the copy of agreement detailing the tariff per unit, in case where refund is on account of export of electricity; (c) a statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of the export of services; (d) a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer; (e) a statement containing the number and date of invoices, the evidence regarding the endorsement specified in the second proviso to sub-rule (1) and the details of payment, along with the proof thereof, made by the recipient to the supplier for authorised operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed and will not claim refund of the amount of tax involved in respect of these invoices, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated; (l) a declaration to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed does not exceed two lakh rupees: Provided that a declaration is not required to be furnished in respect of the cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of sub-section (8) of section 54; (m) a Certificate in Annexure 2 of FORM GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds two lakh rupees: Provided that a certificate is not required to be furnished in respect of cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of subsection (8) of section 54; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m such date of filing. (3) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies. Provided that the time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORM GST RFD-03 by the proper officer, shall be excluded from the period of two years as specified under subsection (1) of Section 54, in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies. 13. It is apparent from the scheme of the CGST Act that an order in respect of an application for refund is required to be made within a period of sixty days from the date of receipt of an application, complete in all respects. 14. The provisions of Section 56 of the CGST Act read with the provisions of Sections 54(7) and 54(8) of the CGST Act makes it amply clear that an applicant would be entitled to interest on the amount of refund due for the period commencing from the date immediately after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently ordered by the Appellate Authority, Appellate Tribunal or the court, the said orders are deemed to be the orders passed under Section 54(5) of the CGST Act. This is expressly stipulated in the Explanation to Section 56 of the CGST Act. It is obvious that the right to receive interest would arise only if the refund is ordered under Section 54 of the CGST Act. The period for which the interest is to be calculated would commence from the date immediately after the expiry of sixty days from the date of the refund application. 18. Mr Rajeev Aggarwal, learned counsel appearing for the Revenue had contended that the grant of interest was not a matter of equity and therefore, is required to be granted strictly in accordance with the statute. He submitted that Rule 89(2) of the Rules, inter alia, provides that the person seeking refund must file an application accompanied by an order passed by the proper officer, or the Appellate Authority or the Appellate Tribunal or the court resulting in such refund. He submitted that Clause (a) of Sub-rule (2) of Rule 89 of the Rules made it clear that a separate application was required to be filed in case the claim of refund was allowed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of two years from the relevant date (as defined under explanation to Section 54 of the CGST Act) but the proceedings before the appellate forum had carried on beyond the said period. This is, plainly, unacceptable, and therefore, the assumption that the application filed after the appellate orders is required to be treated as a fresh application is clearly flawed. 22. It is well settled that an interpretation of a statute that leads to an absurd result must be eschewed. A statute must be interpreted to further its object. The object of providing a period of limitation is clearly to deny the remedies to a person who has not availed the same within the period as stipulated. The rationale is that matters must rest finally within a defined period of time. Thus, the applicant cannot be denied interest on account of the time involved in appellate fora. 23. It is also well settled that an interest is a measure to compensate a person for denial of funds. In Union of India Through Director of Income Tax v. M/s Tata Chemicals Ltd. (2014) 6 SCC 335, the Supreme Court had observed as under: 38. Providing for payment of interest in case of refund of amounts paid as tax or deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plain reading of the main provisions of Section 56 of the CGST Act, a taxpayer would be entitled to interest from the date immediately after the expiry of sixty days from the receipt of the first application under Section 54(1) of the CGST Act, which is accompanied by the documents as specified under Section 54(4) of the CGST Act read with Rule 89 of the Rules. 27. We are also unable to accept that the proviso to Section 56 of the CGST Act in any manner dilutes the right of a taxpayer to receive interest under the main provisions of Section 56 of the CGST Act. It is well settled that a provsio to a clause must be read in the context of the main clause and not as a separate or an independent clause. The main clause and the proviso must be read as a whole. 28. In Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128 , V. R. Krishna Iyer, J. observed that:- 18. .The law is trite. A proviso must be limited to the subject-matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. Words are dependent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso. In the words of Lord Macmillan [Madras Southern Mahratta Railway Co. Ltd. v. Bezwada Municipality, 1944 SCC OnLine PC 7]: (SCC OnLine PC) The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. The proviso may, as Lord Macnaghten [Local Govt. Board v. South Stoneham Union, 1909 AC 57 (HL)] laid down, be a qualification of the preceding enactment which is expressed in terms too general to be quite accurate (AC p. 62). The general rule has been stated by Hidayatullah, J. [ Shah Bhojraj Kuverji Oil Mills Ginning Factory v. Subbash Chandra Yograj Sinha, AIR 1961 SC 1596], in the following words : (AIR p. 1600, para 9) 9. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and ordinarily, a proviso is not interpreted as stating a general rule. And in the words of Kapur, J. [ CIT v. Indo Mercantile Bank Ltd., AIR 1959 SC 713] : (AIR p. 717, para 9) 9. The proper function of a proviso is that it qualifies the generality of the main enactme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 56 of the CGST Act and the proviso to the said section, respectively. Thus, there are two separate rates of interest specified under Section 56 of the CGST Act. The interest at the rate of 6% is payable for the period commencing from a date immediately after expiry of sixty days from the date of an application under Section 54(1) of the CGST Act, however, this rate is enhanced for the period covered under the proviso to Section 56 of the CGST Act. The proviso to Section 56 of the CGST Act expressly provides that an interest at the rate of 9% per annum would be payable from the date immediately after the expiry of sixty days from the receipt of an application, which is filed as a consequent to an order passed by the Appellate Authority, Adjudicating Authority, Appellate Tribunal or a court that has attained finality. This clearly indicates that if a person s claim for refund is a subject matter of further proceedings, which finally culminate in orders upholding the applicant s entitlement, and yet the payment is not made within a period of sixty days from an application filed pursuant to such orders, the person is required to be compensated at a higher rate of interest, of 9% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, do not invite any fresh adjudication. The said applications are merely to implement the orders already passed. Sensu stricto, such application is only for the purposes of convenience and to retrigger the processing of the refund claimed. It is obvious that the petitioner s claim for refund cannot be subjected to repeated rounds of adjudication by the Adjudicating Authority. Once an application for refund under Section 54(1) of the CGST Act has been filed, the same requires to be carried to its logical conclusion. If the said claim is denied by the Adjudicating Authority and the applicant prevails before the Appellate Authority, the order of the Appellate Authority is required to be implemented. However, in one sense, the subsequent application filed by a person pursuant to succeeding before the Appellate Authority, is solely for the purposes of giving a nudge to the process of disbursal of the refund claim and for the proper officer to determine and disburse the interest as payable. 35. In SBI Cards Payment Services Ltd. v. Union of India CWP-1851/2022 decided on 06.01.2023, the Division Bench of Punjab and Haryana High Court had interpreted Section 56 of the CGST Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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