Exporter Can't Be Denied Interest On Refund U/S 56 Of CGST Act For Period Of Delay Attributable To Revenue Dept: Bombay High Court

The High Court held so while considering the prayer for interest on delayed payment of refund of tax as per Section 56 of the CGST Act, 2017.

The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that “Admittedly, the Petitioner has paid the amount of IGST, which the Respondents have utilized up to the date of grant of refund. Having used the money of the Petitioner, there is no justification for denying interest more so when the delay is attributable to the Respondents”. (Para 14)

Such observation came by referring to Section 56 of the CGST Act, as per which the interest on delayed refunds does not provide for excluding the period during which the Department is investigating the grant of refund.

Facts of the case:

The Petitioner/ Assessee, an exporter and supplier of Ethyl Alcohol Liquid Packaging Film & Iodized salt, used to pay Integrated Goods and Services Tax (IGST) on export of the goods, and in return, claims the refund of same based on shipping bills as per the provisions of Section 16(3) of IGST Act r/w Section 54 of CGST Act. However, the refund for the period during August 2018 to July 2019, the refund of IGST of Rs.3.21 crore was delayed, and was granted only in August 2020 after constant follow-up with Respondents/ Department. In its response for such delay, the Petitioner was informed that his name was flagged on the “risky exporters list” and, therefore, after the red flag was removed on receipt of NOC from the Risk Management Centre for Customs, the refund was granted. However, contending that the investigation in cases of “names red flagged” is to be completed within 30 days, the petitioner claimed for interest on delayed refund after excluding the said period of 30 days.

Observations of High Court:

The Bench found that on June 25, 2019, an alert was inserted in the system of Respondents to keep the refund of IGST of the Petitioner in abeyance.

The Bench then referred to the CBEC Circular dated June 17, 2019, as per which the Chief Commissioner of Central Tax shall get the verification of IGST refund claims in accordance with the standard operating procedure to be issued by the CGST policy wing, and furnish a report to the Customs Port on validity of IGST claimed as refund.

The refund plays a very important role in the working capital of an exporter, and therefore, any delay in the grant of the refund would affect the day-to-day running of the business, added the Bench.

In the present case, the Bench found that there is no deficiency on part of petitioner in producing any documents for the grant of refund, and the delay is squarely attributable to the inaction of the Respondents in not completing the investigation within the time frame.

Thus, the Bench observed that the Petitioner cannot be made to suffer because of inaction or delay in the Respondent's action in completing the investigation after the Petitioner has been red flagged.

While emphasizing that shipping bill is considered as an application for refund, the Bench concluded that period for grant of interest on refund of IGST would commence upon expiry of 60 days from date of the shipping bill and would continue till the date of refund of such tax.

Thus, the High Court directed the Respondents to grant interest to the Petitioner, and allowed the Assessee's petition.

Counsel for Petitioner/ Assessee: Sriram Sridharan

Counsel for Respondent/ Revenue: Jitendra B. Mishra, Satyaprakash Sharma, Ashutosh Mishra and Rupesh Dubey

Case Title: Anita Agarwal vs. Union of India (Writ Petition No. 1474 of 2023)

Citation: 2024 (LiveLaw) Bom 594

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