2024 (12) TMI 1397 - HC - GST

Grant of statutory interest in terms of Section 56 of the Central Goods and Services Tax Act, 2017 on delayed refunds - refund application was originally rejected - applicability of Section 56 of the Act - HELD THAT - The authority appears to harbour the view that since the refund application had come to be originally rejected, the provisions of Section 56 would not apply. The said view is clearly rendered untenable and appears to have been rendered in ignorance of the order dated 15 March 2023 pursuant to which the writ petition had itself come to be allowed and the orders passed by the respondent authorities quashed and set aside. The mere fact that the order dated 15 March 2023 did not specifically allude to the provisions contained in Section 56 of the Act would also not detract from the right of the writ petitioner to claim interest which must be paid in terms of the statute itself. While allowing the writ petition, it is also observed that the application for refund would be examined and disposed of in accordance with law . Conclusion - The petitioner is entitled to interest on the delayed refund as per Section 56 of the CGST Act, notwithstanding the initial rejection of the application. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions presented and considered in this judgment are:

Whether the petitioner is entitled to statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act) on the delayed refund of taxes.
Whether the initial rejection of the refund application impacts the applicability of Section 56 of the CGST Act regarding interest on delayed refunds.
Whether the order of the High Court dated 15 March 2023, which remanded the case for reconsideration, affects the petitioner's entitlement to interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Statutory Interest under Section 56 of the CGST Act

Relevant legal framework and precedents: Section 56 of the CGST Act mandates the payment of interest on delayed refunds if the refund is not processed within sixty days from the receipt of the application. The interest rate is specified by the government and can be up to six percent, or nine percent if the refund arises from an order that has attained finality.
Court's interpretation and reasoning: The court interpreted that the entitlement to interest is a statutory right under Section 56 and is not contingent upon specific mention in the remand order. The court emphasized that the statute itself provides for interest on delayed refunds, and the absence of explicit reference in the court's prior order does not negate this entitlement.
Key evidence and findings: The petitioner's refund application was initially rejected due to a mismatch in the period of returns. However, the High Court's order dated 15 March 2023 set aside the rejection and remanded the matter for reconsideration, effectively reinstating the refund application.
Application of law to facts: The court applied Section 56 to the facts, noting that the statutory requirement for interest on delayed refunds remains applicable, given that the refund application was ultimately deemed valid following the High Court's intervention.
Treatment of competing arguments: The respondents argued that interest was not payable because the refund application was originally rejected. The court rejected this argument, stating that the subsequent High Court order nullified the initial rejection, thereby reinstating the petitioner's right to statutory interest.
Conclusions: The court concluded that the petitioner is entitled to interest on the delayed refund as per Section 56 of the CGST Act, notwithstanding the initial rejection of the application.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The court stated, "The mere fact that the order dated 15 March 2023 did not specifically allude to the provisions contained in Section 56 of the Act would also not detract from the right of the writ petitioner to claim interest which must be paid in terms of the statute itself."
Core principles established: The judgment reinforces the principle that statutory entitlements, such as interest on delayed refunds under Section 56 of the CGST Act, are not negated by procedural oversights or omissions in court orders, provided the statutory conditions are met.
Final determinations on each issue: The court quashed the impugned order dated 16 June 2023 and directed the respondents to compute and remit the interest payable under Section 56 of the CGST Act to the petitioner within two weeks.

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