2024 (9) TMI 301 - HC - GST

Refund of the excess amount paid by way of IGST un/s 54 of the Goods and Services Tax Act, 2017 - interest rate of 9% awarded by the writ Court. Refund claim - HELD THAT - As has been rightly held by the writ Court, the provisions under Section 54 is made clear that, when the input tax paid is higher than what has been paid by way of tax for the output, then the dealer is entitled to seek for refund of the excess amount by way of ITC. This has been made clear under the Section, i.e., Section 54 of the GST Act - Even though it was argued on behalf of the Revenue that, ITC itself was only 5%, however voluntarily an excess payment has been made which has been admitted by the seller of the dealer concerned, that cannot ipso facto being an advantage to the dealer to claim refund by invoking the provisions of Section 54 r/w.Section 56 of the GST Act, we are not impressed with the said argument for the reason being that, the very intention of the legislature is to provide the refund only, when there has been an excess amount of tax being collected by way of ITC, that has to be set right by way of refund, if the output tax is lesser than the ITC. If this principle is applied, certainly in the present case, the dealer is entitled to get the refund as admittedly the output tax was only 5%, whereas ITC was 18% - the reason given by the writ Court in rejecting the claim made by the Revenue before the writ Court was to be justified. Rate of interest - HELD THAT - Even though the finality has now been reached in this case by passing orders either by the Appellate Authority or the Tribunal or the Court of Law, it takes back to the Original Authority's order under Sub-section 5 of Section 54. When that being the position, the limitation would start from the date of the Original Authority's order and from that date, if sixty days period is over, after expiry of the sixty days, the dealer is entitled to get the interest at the maximum rate of 6%. The order impugned is sustained, therefore, to that extent, these Writ Appeals filed by the Revenue are liable to be dismissed, hence, are dismissed. However, the rate of interest of 9% allowed by the writ Court through the impugned order is modified into 6% which shall be paid by the Revenue from the date of expiry of sixty days from the date of order passed by the Original Authority.

Summary

Issues:
- Interpretation of Section 54 of the Goods and Services Tax Act, 2017 regarding refund entitlement.
- Validity of interest rate of 9% awarded by the writ Court for the refund.

Analysis:
The judgment by the Madras High Court involved appeals against a common order concerning the entitlement of a dealer to a refund under the GST Act. The dealer had paid higher IGST than required due to the supplier's error, leading to a claim for refund under Section 54 of the Act. The Appellate Authority had allowed the dealer's appeal, prompting the Revenue to challenge the decision in writ petitions. The writ Court upheld the dealer's entitlement to the refund under Sections 54(3)(ii), 54(5), 54(6), and 54(7) of the GST Act. Additionally, the writ Court awarded 9% interest per annum for the refund, which was contested by the Revenue in the appeals.

The Revenue argued that the dealer should not be entitled to a refund as the excess payment made by the supplier was not a valid basis for refund under the Act. They also contended that the interest rate of 9% awarded by the writ Court exceeded the maximum permissible rate of 6% as per the relevant notification. The dealer, on the other hand, acknowledged that the interest rate should be limited to 6% in line with the Act and the notification.

The High Court analyzed the provisions of Section 54 of the GST Act, emphasizing that a dealer is entitled to a refund when the input tax paid exceeds the output tax. The Court rejected the Revenue's argument that the excess payment by the supplier should not benefit the dealer, stating that the legislative intent was to rectify instances where excess tax was collected. As the output tax was lower than the input tax in this case, the dealer was deemed eligible for the refund.

Regarding the interest rate, the Court agreed with the Revenue that the 9% rate awarded by the writ Court exceeded the prescribed maximum of 6%. The Court clarified that the interest calculation should start from the expiry of sixty days from the Original Authority's order, with the maximum rate being 6%. Consequently, the Court modified the interest rate to 6% from the specified date, upholding the rest of the writ Court's decision. The appeals were dismissed with the modified order, adjusting the interest rate but maintaining the refund entitlement.