Interest Would Be Payable At The Rate Of 6% Not 9%-If Delay In Granting Refund Is Not Substantial – Hon’ble Supreme Court

The Hon’ble Supreme Court vide its order dated 19th April 2022 in the matter of Union of India & Ors.  Vs.  M/s Willowood Chemicals Ltd. & Anr.  And Union of India & Ors.  Vs.  M/s Saraf Natural Stone & Anr. in Civil Appeal Nos. – 2995-2996 OF 2022 and Civil Appeal Nos. – 2997-2998 OF 2022 held that the delay in the instant case is ranging from 94 to 290 days and not so inordinate, thus interest would be payable at the rate of 6% not 9%.  Further, the relevant provision has provided the rate of interest at 6% in case of refund governed by the principal provision of Section 56 of the Act.

The appeals have been preferred by the Appellant Revenue against the orders dated 10.07.2019 of Gujarat High Court in Special Civil Application No.18591 of 2018 and against the order dated 13.03.2020 passed in Review Petition arising therefrom being Misc (‘the first case’). Civil Application No.1 of 2019 and in Special Civil Application No.15925 of 2018 and against the order dated 13.03.2020 passed in Review Petition arising therefrom being Misc. Civil Application No.1 of 2019 (‘the Second Case).

Facts:

  • The issue involved in both the cases (before the Hon’ble High Court) was regarding the interest amount to be remitted by the revenue for inordinate delay in granting refunds. It was the contention of the petitioner that inordinate delay impacted the working capacity of the Writ petitioners and reduced their ability to conduct business.
  • That in the second case arises out of a Writ Petition, being Special Civil Application No.15925 of 2018 filed by M/s. Saraf Natural Stone. It was submitted by the petitioner that: –
    1. The Petitioner states that in terms of Section 16 of the IGST Act. The Integrated Goods and Services Tax Act, 2017, 2017, a registered person making exports of goods outside India, shall be eligible to claim, refund of either unutilized input tax credit on export of goods under bond or letter of undertaking or refund of Integrated tax paid on export of goods.
    2. It was further stated that Section 16(3) of the IGST Act, provides that refund should be claimed in accordance with the provisions of Section 54 of the CGST Act. That in view of rule 2 and Section 20 of the IGST Act further provides that provisions of CGST Act relating to refunds shall, mutatis mutandis, apply, so far as may be, in relation to Integrated tax as they apply in relation to central tax as if they are enacted under this Act.
    3. The rate of tax has been fixed at 6% and 9% vide Notification No’s – 13/2017- Central Tax, dated 28.06.2017 and Notification No.6/2017 – integrated tax dated 28.06.2017.
    4. The Petitioner further stated that there was substantial period of delay in receipt of refund. Thus, it was prayed to direct the respondents to provide appropriate compensation as well as interest, for delay in granting the refund.
  • The details of 15 refunds made to the Writ Petitioner showed that there was delay ranging from 94 to 290 days.
  • That in the first case, M/s Willowood Chemicals Pvt. Ltd., it was submitted that as per Section 16 of IGST read with Section 54 of the CGST, the petitioner is entitled for appropriate compensation for delayed payment of the refund. The First Case dealt with 12 refunds, delay ranging from 94 to 290 days.
  • That the High Court vide its judgment dated 10.07.2019, in the second case held: – 
    1. after considering the submissions and taking reference of T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka (2011) 9 SCC 1 , Sandvik Asia Ltd. v. Commissioner of Income Tax-I Pune and others (2006) 2 SCC 508 and Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals (2014) 1 SCC 126, held that the position appears to be settled.
    2. The respondents have not explained the reasons of delay as raised by the Writ applicants.
    3. In the overall view of the matter, we are inclined to hold the respondents liable to pay simple interest on the delayed payment at the rate of 9% per annum
  • That the first case was disposed of on the same day relying on the ratio laid down in the Second Case and the respondents were directed to pay the interest at the rate of 9% to the Writ Petitioner.
  • The Appellant being aggrieved preferred review petitions in both the cases contending that ‘as per Section 56 of the CGST the interest may be granted at the rate of 6% however the Hon’ble Court was pleased to give interest at the rate of 9%.’
  • The Hon’ble High Court vide separate orders dated 13.3.2020 dismissed both the review petitions. The above-mentioned orders are in challenge in the present appeal. 

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