Interest payment cannot be denied on refunds under Section 56 of the CGST 2017

Baba Super Minerals Private Limited
Vs
Union Of India
D.B. Civil Writ Petition No. 13746/2022
Date of Judgement: 05/01/2024

Background:

The petitioner filed for tax refunds under the CGST Act using Form GST RFD-01A and Refund ARN receipt, addressing initially identified deficiencies. Despite rectifying these issues, interest on the refunded amount was not granted by the authorities. The petitioner argued that Section 56 of the CGST Act mandates interest payment from the 60th day of application submission. However, the respondents claimed deficiencies as grounds for denying interest. The court observed inconsistencies, noting that interest was withheld even when no deficiencies existed. Section 56 specifies interest payment if refunds are not processed within 60 days of application receipt. The court interpreted “receipt” to include the time taken to rectify deficiencies, necessitating interest calculation from this adjusted date.

Issue:

Whether interest on tax refunds under Section 56 of the CGST Act should be granted from the original application date or the date of deficiency rectification ?

Important Paras:

Para 11. The indications made in Section 56 of the Act of 2017, pertaining to ‘the date of receipt of the application’, can only be read as date of receipt of a ‘complete application’ i.e. in case, there are deficiencies, from the date the deficiencies are removed by the applicant.

Para 12. As in the present case, there were deficiencies in three cases and in one case, there was no deficiency and the amount of CGST, SGST and IGST have been refunded to the petitioner beyond 60 days, the respondents are required to determine the actual delay and make payment of the amount of interest to the petitioner in terms of provisions of Section 56 of Act of 2017.

Para 13. Consequently, the writ petitions, filed by the petitioner, are disposed of.

Para 14. The respondents are directed to make payment of amount of interest to the petitioner in terms of the provision of Section 56 of the Act of 2017, calculating the period of 60 days from the date of completing the application.

Para 15. The petitioner, in this regard, would make an application to the respondents pointing out the amount of interest due to the petitioner and from the date of submission of the applications, within a period of four weeks, the amount of interest shall be paid to the petitioner.