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.

Summary

Issues Involved:
1. Date from which statutory interest under Section 56 of the CGST Act, 2017 gets triggered.

Summary:

Issue 1: Date from which statutory interest under Section 56 of the CGST Act, 2017 gets triggered

Notice in this writ petition was issued on 21.12.2018. At the point in time when the writ petitioner had approached this court, several reliefs were sought, which, during the pendency of the writ action, was pared down to a singular issue.

Thus, at the present juncture, we are required to rule on one issue, i.e., the date from which statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 [in short, "CGST Act"�] would get triggered. The petitioner claims that interest should be triggered from the date when the initial application for refund was filed. On the other hand, the respondent/revenue asserts that in terms of the proviso appended to Section 56 of the CGST Act, interest will get triggered 60 days after the date when this court passed an order directing consideration of the application.

The petitioner is in the business of exporting jewellery. The petitioner had, concededly, purchased jewellery, which was exported thereafter. The petitioner had claimed, for the period in issue, Input Tax Credit [ITC]. The period involved, i.e., the period for which ITC was claimed, was August 2017 and September 2017. Concededly, the petitioner had filed refund applications in view of the fact that these were zero rated supplies against the export made on 06.01.2017.

The respondents/revenue had raised a deficiency memo on 13.02.2018, which was cured on 16.02.2018. Admittedly, on 07.05.2018, a notice was issued calling upon the petitioner to show cause as to why refund amounting to Rs. 59,67,280/- lakhs ought not to be disallowed, qua the exports made in August 2017. A notice of even date, i.e., 07.05.2018, on almost identical lines, which set forth the amount of disallowance qua refund vis-a-vis the exports made in September 2017, was issued as well. The proposed amount of refund which was disallowed for the month of September 2017 was Rs. 1,70,20,253/-. The petitioner filed two separate response of even date, i.e., 10.05.2018, to the said show cause notices. The explanation given by the petitioner did not find favour with the respondents/revenue and accordingly, via two orders dated 11.05.2018, it disallowed refund for the months of August 2017 and September 2017, as indicated in the show cause notices dated 07.05.2018.

There are two circulars which have been issued by the Central Board of Excise and Customs [CBEC]. The first circular dated 21.12.2017, inter alia, indicated by way of clarification that the refund claim concerning zero rated supply shall be filed manually for the relevant tax period, in the prescribed form, albeit on monthly basis. As alluded to above, although no purchases were made by the petitioner in October 2017, it exported jewellery weighing 1,44,470.523 grams in the said month. That such a claim was viable is evident upon a perusal of the second circular, i.e., Circular no. 37/11/2018 dated 15.03.2018.

As indicated right in the beginning, it is in this backdrop, that the petitioner had approached this Court by way of a writ action. Notice, as observed at the outset, was issued on 21.12.2018. On the returnable date i.e., 11.01.2019, a coordinate Bench of this court gave liberty to the petitioner to file its application for refund manually, having regard to the fact that the period for moving application for refund i.e., two years, had not expired. The court, specifically, directed the respondents/revenue, i.e., the concerned authority, to examine the application, which as indicated above, had to be filed manually, in accordance with the law.

It is not in dispute that the respondents/revenue, in a sense, sidestepped the specific directions issued by the court on 11.01.2019 giving the petitioner liberty to file the application manually and thus, went on to reject the applications, which were filed manually on 28.01.2019. The respondents/revenue's order to this effect was passed on 22.03.2019, which impelled the petitioner to approach this court, once again, during the pendency of the writ action.

The record shows that on 28.03.2019, the court set aside the order dated 22.03.2019 and directed the respondents/revenue, i.e., the concerned authority, to once again examine the petitioner's application for refund, which had been filed manually.

It is not in dispute that thereafter, the respondents/revenue passed an order dated 24.05.2019 and granted refund in full, after having rejected the same by separate orders of even date, i.e., 11.05.2018. Thus, the total amount which was refunded to the petitioner was Rs. 29,90,532/-. This was the sum total of the amount which was the subject matter of the aforementioned two orders of even date, i.e., 11.05.2018.

It is also not in dispute that on 08.07.2019, the respondents/revenue passed an order sanctioning interest amounting to Rs. 70,861/-.

Thus, the position which emerges from the facts as set forth hereinabove is that in the initial round, the petitioner was granted cumulative refund for August and September, 2017 amounting to Rs. 12.24 crores and the cumulative amount which was denied for the very same months was Rs. 2.30 crores (approximately). This amount was, however, sanctioned ultimately on 24.05.2019, with interest amounting to Rs. 70,861 being sanctioned on 08.07.2019.

Mr Puneet Agrawal, who appears on behalf of the petitioner, says that the calculation of interest is not in accordance with the provisions of Section 56 of the CGST Act. According to Mr Agrawal, the interest at the notified rate, which is presently 6%, should run from 60 days after the date when the deficiency application, qua initial application of refund filed on 16.12.2017, was cured. As per this contention advanced by Mr Agrawal, the interest should run from 18.04.2018 and would end on the date when the amount was remitted for the respective months, both against the CGST and DGST.

The record shows that in case of CGST, the refund for the months of August and September 2017 was concededly remitted on 02.07.2019 whereas qua DGST, the amount was remitted to the petitioner for the months of August and September 2017 on 28.05.2019.

Mr Satyakam and Mr Shadan Farasat, learned additional standing counsel, who appear on behalf of the respondents/revenue, contest the position taken by Mr Agrawal. It is their contention that the proviso appended to Section 56 of the CGST Act deals with both substantial and procedural orders. In other words, according to Messrs Satyakam and Farasat, although the order granting refund, i.e., order dated 24.05.2019, was procedural in nature, the proviso will get attracted. Secondly, it is submitted by Messrs Satyakam and Farasat that in a taxing statute, the court would have to go by textual interpretation and therefore, no leeway should be given for shifting the date from which interest would get triggered. In this particular case, according to them, interest was triggered post the order passed by this court in the writ action on 28.03.2019. Thirdly, the proviso is "žagnostic' to the reason based on which interest is triggered. This submission is tied in with the second submission made by Messrs Satyakam and Farasat. Lastly, it is submitted that it is because of this reason that a higher rate of interest is granted when the interest is triggered due to orders issued by the statutory authorities, which includes the court. In this context, our attention is drawn to the fact that in the main part of Section 56 of the CGST Act, the interest which can be notified by the Government on the recommendation of the council, can go up to 6%, whereas under the proviso, this range can extend up to 9%.

As noticed above, insofar as the main part of Section 56 is concerned, the interest has been notified at 6%. We are also informed that under the proviso, the interest has been notified at 9%.

We have heard learned counsel for the parties at some length. In our view, one cannot quibble with the fact that when one is dealing with a taxing statute, equity does not come into play. It is also well-established that the plain language of the text has to be given its full play while dealing with statutes concerning revenue or tax. That said, such meaning has to be given to a proviso, which does not destroy or disrupt what is stated in the main part of the provision. The proviso carves out an exception to the main provision.

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.

Section 54 generally deals with refund on tax. Sub-section (1) of Section 54 clarifies that 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.

Sub-section (5) of Section 54, which is relevant for our purposes, reads as follows:

"(5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57."�

In this particular case, more than the order rejecting a part of the refund, the show-cause notices dated 07.05.2018 gives the clue as to why the refund was declined. The reasons given in the notices are identical, although two separate orders were passed for the months of August and September 2017. As would be evident, 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, as noted above, the inadmiss