2022 (4) TMI 980 - SC - GST

Grant of interest / compensation for delayed Refund of unutilized input tax credit - Rate of interest - HC awarded 9% instead of 6% applying the proviso to section 56 - zero rated supply - export of goods - Section 54 r.w.section 56 of the CGST Act - HELD THAT - A registered person making export of goods outside India, is entitled in terms of Section 16 of the IGST Act to claim refund of either unutilized input tax credit of export of goods under bond or letter of undertaking or refund of integrated tax paid on export of goods. In terms of Section 20 of the IGST Act, any claim for refund is to be governed by the provisions of the CGST Act which would apply mutatis mutandis as if they were enacted in the IGST Act. The application for refund, therefore, is required to be preferred in accordance with Section 54 of the CGST Act. According to Section 56 of the CGST Act, if an applicant is not refunded any tax ordered to be refunded by the Proper Officer under Section 54(5) within 60 days from the receipt of the application, interest at such rate not exceeding 6 per cent would become payable after the expiry of 60 days from the date of receipt of application till the date of refund of such tax. The proviso to said Section prescribes that where any claim of refund arises from an order passed by an Adjudicating Authority or Appellate Authority or Appellate Tribunal or Court and if the same is not refunded within 60 days from the date of receipt of an application filed consequent to such an order, the rate of interest payable would be 9 per cent. The instant cases have not arisen from any order passed by an Adjudicating Authority or Appellate Authority or Appellate Tribunal or Court and the cases are strictly within the scope of the principal provision of Section 56 and not under the proviso thereof. In light of these provisions, the question which arises for consideration is whether the High Court was justified in awarding interest at the rate of 9 per cent per annum. In GODAVARI SUGAR MILLS LTD. VERSUS STATE OF MAHARASHTRA ORS. 2013 (6) TMI 23 - SUPREME COURT , a bench of two Judges of this Court considered the question whether interest on the compensation amount at the rate of 9 per cent per annum could be awarded when the terms of Section 6 of the Maharashtra Agriculture Lands (Ceiling of Holdings) Act, 1961 prescribed payment of interest only at the rate of 3 per cent per annum. Coming back to the present cases, the relevant provision has prescribed rate of interest at 6 per cent where the case for refund is governed by the principal provision of Section 56 of the CGST Act. As has been clarified by this Court in GODAVARI SUGAR MILLS LTD. VERSUS STATE OF MAHARASHTRA ORS. 2013 (6) TMI 23 - SUPREME COURT and MODI INDUSTRIES LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX AND ANOTHER 1995 (9) TMI 324 - SUPREME COURT wherever a statute specifies or regulates the interest, the interest will be payable in terms of the provisions of the statute. Wherever a statute, on the other hand, is silent about the rate of interest and there is no express bar for payment of interest, any delay in paying the compensation or the amounts due, would attract award of interest at a reasonable rate on equitable grounds - It is precisely for this reason that paragraph 9 of the decision in Godavari Sugar Mills Ltd. accepted the submission made by the learned counsel for the respondents and confined the rate of interest to the prescription made in the statute. Since the delay in the instant case was in the region of 94 to 290 days and not so inordinate as was the case in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT , the matter has to be seen purely in the light of the concerned statutory provisions. In terms of the principal part of Section 56 of the CGST Act, the interest would be awarded at the rate of 6 per cent. The award of interest at 9 per cent would be attracted only if the matter was covered by the proviso to the said Section 56. The High Court was in error in awarding interest at the rate exceeding 6 per cent in the instant matters. The original writ petitioners would be entitled to interest at the rate of 6 per cent per annum on amounts that they were entitled by way of refund of tax - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility for interest on delayed refund under the IGST and CGST Acts.
2. Appropriate rate of interest for delayed refund.
3. Maintainability of writ petitions for claiming interest on delayed refunds.

Issue-wise Detailed Analysis:

1. Eligibility for Interest on Delayed Refund:
The appeals arose from two cases where the petitioners claimed refunds of integrated tax paid on export of goods, citing delays in receiving these refunds. They argued that under Section 16 of the IGST Act, they were entitled to refunds of unutilized input tax credit or integrated tax paid on exports. Section 20 of the IGST Act and Section 54 of the CGST Act were invoked to claim these refunds, with the petitioners highlighting substantial delays ranging from 94 to 290 days. The High Court acknowledged the delays and ruled that the petitioners were entitled to interest on the delayed refunds, as the inaction by the authorities was arbitrary and impacted their business operations.

2. Appropriate Rate of Interest for Delayed Refund:
The central issue was the rate of interest applicable to delayed refunds. The petitioners sought interest at 9% per annum, citing significant delays. The High Court awarded interest at this rate, relying on decisions such as K.T. Plantation Pvt. Ltd. v. State of Karnataka and Sandvik Asia Ltd. v. Commissioner of Income Tax-I Pune. However, the appellants contended that as per Section 56 of the CGST Act, the interest rate should not exceed 6% per annum unless the refund arose from an order by an adjudicating authority, appellate authority, or court, in which case the rate could be 9%. The Supreme Court clarified that the cases did not arise from such orders and should be governed by the principal provision of Section 56, thus limiting the interest rate to 6%.

3. Maintainability of Writ Petitions for Claiming Interest on Delayed Refunds:
The maintainability of writ petitions solely for claiming interest on delayed refunds was debated. Initially, the Supreme Court in Union of India v. Orient Enterprises held that such writ petitions were not maintainable. However, in Godavari Sugar Mills Ltd., the Court clarified that writ petitions could be entertained if they sought enforcement of statutory functions or involved public law functions. The Supreme Court in the present judgment upheld the maintainability of the writ petitions, aligning with the principle that courts could grant consequential relief, including interest, when enforcing statutory rights.

Conclusion:
The Supreme Court concluded that the High Court erred in awarding interest at 9% per annum, as the statutory provisions under Section 56 of the CGST Act prescribed a maximum of 6% for the cases in question. The appeals were allowed, directing that the petitioners were entitled to interest at 6% per annum. Since the amounts with 6% interest had already been paid, no further action was required. The judgment reinforced that statutory provisions govern the rate of interest on refunds, and deviations are permissible only under exceptional circumstances or specific statutory provisions.