2020 (8) TMI 51 - HC - GST

Interest on refund - Refund of the amount wrongly forfeited from the pending refund application - levy of interest on available ITC - Section 50 of the CGST Act - HELD THAT - Issue Notice. List on 20th October, 2020.

Summary

Issues:
Challenge to rejection of refund application, liability to pay interest under Section 50 of CGST Act, violation of principles of natural justice in issuing show cause notice, double taxation concern regarding interest on tax component.

Challenge to Rejection of Refund Application:
The petition challenges the rejection of a refund application dated 5th December, 2019, along with a corrigendum dated 18th December, 2019. The petitioner seeks a direction for the refund of the amount forfeited from the pending refund application. The matter was listed urgently and heard via video conferencing.

Liability to Pay Interest under Section 50 of CGST Act:
The petitioner requests a declaration that interest under Section 50 of the CGST Act should be limited to the net tax liability and not be charged on available Input Tax Credit (ITC). The petitioner urges respondent nos. 1 and 2 to implement decisions from GST Council Meetings recommending interest be charged only on the net liability of the taxpayer after considering admissible credit.

Violation of Principles of Natural Justice:
The petitioner argues that principles of natural justice were violated as no proper show cause notice was issued under Section 73 of the CGST Act, and no opportunity for a hearing was granted before rejecting the refund application. The petitioner contends that the absence of a show cause notice deprived them of a chance to present their case effectively.

Double Taxation Concern Regarding Interest on Tax Component:
The petitioner asserts that interest under Section 50 of the CGST Act should only apply to the net tax liability, not to the tax component already deposited in the Government Treasury as eligible ITC. The petitioner argues that levying interest on the tax component already paid would result in double taxation. Reference is made to a previous court order supporting this argument.

The court issued notice to the respondents, directing them to file counter-affidavits within four weeks and allowing for rejoinder-affidavits before the next hearing scheduled for 20th October, 2020. The order was to be uploaded on the website immediately, with a copy sent to the counsel via email.