2023 (5) TMI 796 - HC - GST

Interest on delayed refund of CGST and IGST not processed despite sanctioned - rate of interest - HELD THAT - In so far as the interest for the period commencing from 04.10.2021 is concerned, this Court had expressed its prima facie view in the order dated 01.05.2023, that the same would be payable as there has been an inordinate delay in disbursing the refund. Interest is essentially a compensation to a person who has been deprived of use of the amounts due to him. It is relevant to refer to the observations made by the Supreme Court in UNION OF INDIA THROUGH DIRECTOR OF INCOME TAX VERSUS M/S TATA CHEMICALS LTD. 2014 (3) TMI 610 - SUPREME COURT where it was held that The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course. Undisputedly, if a person is denied of the payment due to him, he is required to be compensated. In SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT the Supreme Court has endorsed the principle that interest would be payable even in cases where there was no statutory provision for payment of interest. Thus, the petitioner is entitled to interest on the sum of ₹68,37,488/- from 01.11.2021 (considering an allowance of twenty-six days for the respondents to comply with the refund sanction order dated 04.10.2021) till the date of payment, that is, 27.04.2023 - the present petition is disposed of by directing the respondents to pay the interest on the amount of ₹68,37,488/- from 01.11.2021 till 27.04.2023 at the rate of 6% per annum as expeditiously as possible and, in any event, before 31.05.2023. Petition disposed off.

Summary

Issues:
The issues involved in the present case are the claim for interest on a refunded amount, specifically focusing on the delay in processing the refund of Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST), and the applicable rate of interest.

Interest Claim and Refund Processing:
The petitioner filed a petition seeking interest on an amount refunded. The refund included SGST, CGST, and IGST components. While SGST refund was processed and disbursed, CGST and IGST refunds were delayed despite the sanction order. The petitioner claimed interest on the delayed amounts. After the petition was filed, the concerned authorities disbursed the sanctioned refund. The issue now pertains to the interest payable on the refunded amount.

Interest Components and Appeal:
The petitioner claimed two components of interest: one for the period before the refund order and the other for the delayed payment post the order. The petitioner decided not to press for interest before the refund order date as an appeal on this matter is pending. However, they requested expedited processing of the appeal.

Court's Decision on Interest:
The Court acknowledged the delay in refund disbursement and expressed a view that interest should be payable. Referring to legal precedents, the Court emphasized that interest serves as compensation for deprivation of funds. The Court ruled in favor of the petitioner, awarding interest on the refunded amount from a specified date until the payment date.

Rate of Interest and Disposition:
The Court considered the compensatory nature of interest and noted the statutory rate of 6% per annum. While the petitioner suggested a flexible rate, the Court upheld the 6% rate due to statutory provisions. The judgment directed the respondents to pay the interest promptly and adjudicate on the appeal for additional interest prior to the refund order date. The petition was disposed of with these directives.