Delhi High Court Directs GST Dept. To Pay 6% Interest For Delayed IGST Refund

The Delhi High Court has directed the GST department to pay 6% interest on delayed IGST refund.

The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that Section 56 of the CGST/DGST Act deals with the interest on delayed refunds. It provides that if any tax ordered to be refunded under sub-section (5) of Section 54 is not refunded within 60 days from the date of receipt of application, interest at the rate of 6% shall be payable in respect of such refund from the date immediately after the expiry of 60 days from the date of the receipt of the application till the date of refund of such tax.

The petitioner/assessee is an exporter of mobile phones of various brands and accessories. Beginning from April 2022, the petitioner has been exporting the mobile phones and its accessories to M/s AZ Logistic, Dubai, UAE on payment of Integrated Goods & Service Tax (IGST). The refunds in normal course were claimed through shipping bills, which were released by the Customs through ICEGATE after processing the shipping bills filed from time to time.

During the month of December 2022, mobiles worth Rs. 9,06,49,174 were exported on payment of IGST. For the month of February 2023, exports to the tune of Rs. 2,80,38,271 were made, on which IGST of Rs. 50,46,889 was paid. Likewise, in the month of March 2023, exports worth Rs. 95,90,489 were made, on which IGST of Rs. 17,26,288 was paid, and for the month of May 2023, mobiles and their accessories were exported after discharging the burden of IGST.

The assessee contended that as per sub Rule (2) of Rule 96 of the CGST/DGST Rules, 2017, details of export invoices in respect of export of goods contained in Form GSTR-I were transmitted electronically by the common portal to the system designed by the Customs. The system electronically transmits to the common portal a confirmation that the goods covered by the invoices have been exported out of India, where after, refund is processed by the Customs through ICEGATE in terms of Rule 96(3).

The court held that interest under Section 56 becomes payable if, on the expiry of the period of 60 days from the date of receipt of the application for refund, the amount claimed is still not refunded. Payment of interest under Section 56, being statutory, is automatically payable without any claim, in case the refund is not made within 60 days from the date of receipt of the application. Payment of interest does not depend on the claim made by the petitioner and therefore cannot be denied on the ground of waiver of the claim of interest in FORM GST-RFD-01. Moreover, the question of payment of the grant of interest arises only if the refund is not granted within 60 days from the date of receipt of the application. No justification has been shown by the respondent for the delay in payment of the refund within the stipulated period. Thus, even though the petitioner may not have claimed interest in his refund applications, his claim of interest cannot be denied under Section 56 as it is mandatory and payable automatically in terms of the provisions of the GST Act.

“The petitioner is entitled to statutory interest at the rate of 6% starting from the date immediately after the expiry of sixty days from the date of receipt of refund applications until the date on which the refund is credited to the bank account of the petitioner. The respondent is accordingly directed to process the refund of interest and credit the same into the account of the petitioner within four weeks,” the court said.

Counsel For Petitioner: Virag Tiwari

Counsel For Respondent: Rajeev Aggarwal

Case Title: Raghav Ventures Versus Commissioner Of Delhi Goods & Services Tax

Citation: 2024 LiveLaw (Del) 281

Case No.: W.P. (C) 12209/2023

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