UNION OF INDIA VERSUS WILLOWOOD CHEMICALS PVT. LTD.

Interest on delayed refunds – section 56 of CGST Act – this Court directed the applicants herein to pay simple interest on the delayed payment @ 9% per annum – case of applicant is that the directions could not have been for making payment @ 9% per annum but, in fact, it should have been @ 6% per annum as provided under Section 56 of the CGST Act.

HELD THAT:- No case is made out for review of the order passed by this Court dated 10.07.2019. Having regard to the peculiar facts and circumstances of the case, this Court thought fit to award interest @ 9% per annum.

Application dismissed.

No.- MISC. CIVIL APPLICATION (FOR REVIEW) NO. 1 of 2019 In R/SPECIAL CIVIL APPLICATION NO. 18591 of 2018

Dated.- March 13, 2020

Citations:

  1. Commissioner of Income Tax, Gujarat Versus Gujarat Fluoro Chemicals – 2013 (10) TMI 117 – Supreme Court
  2. K.T. Plantation Pvt. Ltd. & Anr Versus State Of Karnataka – 2011 (8) TMI 1107 – Supreme Court
  3. Sandvik Asia Limited Versus Commissioner Of Income-Tax And Others – 2006 (1) TMI 55 – Supreme Court
  4. WILLOWOOD CHEMICALS PVT. LTD. And 1 other (s) Versus UNION OF INDIA And 2 other (s) – 2019 (7) TMI 1328 – GUJARAT HIGH COURT
  5. M/s SARAF NATURAL STONE Versus UNION OF INDIA – 2019 (7) TMI 1282 – GUJARAT HIGH COURT
  6. State of Gujarat Versus Doshi Printing Press – 2015 (3) TMI 211 – GUJARAT HIGH COURT
  7. SHIV KUMAR JAIN Versus UNION OF INDIA – 2003 (11) TMI 99 – HIGH COURT AT CALCUTTA

Mr. Justice J.B. Pardiwala And Mr. Justice A.C. Rao

For the Petitioner : Viral K Shah

For the Respondent : Mr Vinay Shraff For Parth S Shah

IA ORDER

(PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA)

Rule returnable forthwith. Mr. Parth S. Shah, the learned counsel, waives service of notice of rule for and on behalf of the opponents.

This is an application at the instance of the original respondents of the Special Civil Application No.18591 of 2018 with the following prayers :

“a) This Hon’ble Court is pleased to admit and allow this petition.

b) This Hon’ble Court be pleased to recall or review order dated 10.07.2019 passed in Special Civil Application No.18591 of 2018 in the interest of justice;

c) Such other and further relief as this Hon’ble Court may deem just, fit and expedient be granted in favour of the petitioner.”

While allowing the main matter i.e. the Special Civil Application No.18591 of 2018 vide order dated 10.07.2019, this Court observed in paragraph 14 to 25 of the similarly situated writ application being Special Civil Application No.15925 of 2018 as under :

“14. Section56 of the CGST Act provides that if any tax ordered to be refunded under sub-section(5) of Section 54 to any applicant is not refunded within sixty days from the date of receipt of the application under sub-section (1) of that section, interest at such rate not exceeding 6% as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of the application under the sub-section till the date of refund of such tax. Section56 of the CGST Act reproduced herein below:

Section-56: Interest on Delayed Refunds:

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Explanation: For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).

15. Rule 94 of the CGST provides for the order sanctioning interest on delayed refunds. It reads as follows:

Rule 94: Order Sanctioning Interest on Delayed Refunds:

Where any interest is due and payable to the applicant under section 56, the proper officer shall make an order along with a payment order in FORM GST RFD-05, specifying therein the amount of refund which is delayed, the period of delay for which interest is payable and the amount of interest payable, and such amount of interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.

16. We shall now look into few decisions of different High Courts including our High Court on the subject.

17. The Calcutta High Court in the case of Shiv Kumar Jain Vs. Union of India reported in 2004 (168) E.L.T. 158 (Cal.) held as under:

“ 4. In my view, the time taken for refund of the money in terms of the CEGAT’s order is unreasonable. CEGAT’s order was passed on 21st June, 2001 so one could expect either the matter to be taken to higher up, and for this, under law ninety days time is given and on expiry of this time the department was expected to refund this money, since it is a Government Department. So, unlike the ordinary citizen another three months of grace time may be given for taking action. So, the department should have released this amount within the reasonable time of six months, namely by 31st December, 2001.

Unfortunately, this has not been done. So, I think after expiry of 31st December, 2001 the Government has no justification for withholding this money, and I hold this is an negligent inaction on the part of the Government. The Government cannot deprive the enjoyment of the property without due recourse to law and this withholding cannot be termed to be a lawful one nor an established procedure under the law. Therefore, this inaction is wholly unjustified and this has really caused the deprivation of the petitioner’s enjoyment of the property namely the aforesaid amount. Therefore, this is positively violative of the provision of Article 300A in Chapter IV under Part XII of the Constitution of India. When there is breach of constitutional right either by omission or by commission by the State such breach can be remedied under Article 226 of the Constitution of India. The petitioner could have earned interest during this period but because of the withholding this could not be done. I find in support of my observation from the judgment cited by Mr. Chowdhury as above. In that case a pre deposit amount was directed to be refunded with interest at the rate of 15% per annum. Of course at that point of time the rate of interest of Bank might be higher, but having regard to the present facts and circumstances of this case the rate of interest as allowable now admittedly by the Reserve Bank of India in case of its bond not exceeding 8% per annum, will be appropriate. Therefore, I direct the respondents to pay interest at the rate of 8% on the aforesaid amount of ₹ 10 lacs to be calculated from January 2002 till 3rd April, 2003 when the payment of principal amount was effected. This payment of interest shall be made within a period of three months from the date of communication of this order. However, there will be no interest for this period.”

18. A Five Judge Bench of the Supreme Court in the matter of K.T. Plantation Pvt. Ltd. & Anr. Vs. State of Karnataka reported at (2011) 9 SCC 1 in para 143 held that:

……..

(e) Public purpose is a pre-condition for deprivation of a person from his property under Article 300A and the right to claim compensation is also inbuilt in that Article and when a person is deprived of his property the State has to justify both the grounds which may depend on scheme of the statute, legislative policy, object and purpose of the legislature and other related factors.

……..

19. A Division Bench of this Court in the matter of State of Gujarat Vs. Doshi Printing Press reported at MANU/GJ/0420/2015 held that:16.

From the conjoint reading of the decision of the Apex Court in the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supra) and the latter decision of the Larger Bench in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (supra) it appears that the liability to pay interest on interest by the Revenue is not approved and to that extent the contention of the Revenue can be maintained. But the further contention of the Revenue that no interest whatsoever would be payable if the refund of the amount of tax or refund of the amount deposited towards tax is to be made, no interest whatsoever would be available by way of compensatory measure.

17.In our view, the general principles for awarding compensation to the Assessee for the delay in receiving monies properly due to it is not disapproved by the Larger Bench of the Apex Court in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (supra).”

13. In our view, the above-referred observation made by this Court in the above-referred decision in case of Gujarat Fluoro Chemicals (supra) is a complete answer to the contention of the learned A.G.P. that the interest can be awarded even if not expressly barred by the statute or that the taxing statute is silent about the same”.

20. The word ‘Compensation’ has been defined in P. Ramanatha Aiyar’s Advanced Law Lexicon 3rd Edition 2005 page 918 as follows:

“An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased; some thing given or obtained as an equivalent; the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value; a recompense given for a thing received recompense for the whole injury suffered; remuneration or satisfaction for injury or damage of every description; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer.”

21. We may now reproduce the Chart indicating the delay in days:-

Delay in refund for SARAF NATURAL STONE

Month Invoice Date Refund Amount Date of filing of GSTR 3 7 days from Return Filing Date of Refund Delay in days
July’17 06/07/17 12018 25/08/2017 01/09/17 18/06/2018 290
10/07/17 16380 25/04/2018 236
10/07/17 12763 25/04/2018 236
11/07/17 2,33,103 04/12/17 94
12/07/17 2,77,949 04/12/17 94
13/07/2017 9183 25/04/2018 236
13/07/2017 2,17,718 04/12/17 94
13/07/2017 12534 25/04/2018 236
14/07/2017 1,97,712 04/12/17 94
14/07/2017 2,26,655 04/12/17 94
14/07/2017 19720 25/04/2018 236
15/07/2017 16274 04/12/17 94
15/07/2017 25464 25/04/2018 236
15/07/2017 12333 25/04/2018 236
15/07/2017 14917 25/04/2018 236

22. The position of law appears to be well-settled. The provisions relating to an interest of delayed payment of refund have been consistently held as beneficial and non-discriminatory. It is true that in the taxing statute the principles of equity may have little role to play, but at the same time, any statute in taxation matter should also meet with the test of constitutional provision.

23. The respondents have not explained in any manner the issue of delay as raised by the writ-applicants by filing any reply.

24. The chart indicating the delay referred to above speaks for itself.

25. 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. The authority concerned shall look into the chart provided by the writ-applicants, which is at Page30, Annexure-D to the writ-application and calculate the aggregate amount of refund. On the aggregate amount of refund, the writ-applicants are entitled to 9% per annum interest from the date of filing of the GSTR-03.

The respondents shall undertake this exercise at the earliest and calculate the requisite amount towards the interest. Let this exercise be undertaken and completed within a period of two months from the date of receipt of the writ of this order. The requisite amount towards the interest shall be paid to the writ-applicants within a period of two months from the date of receipt of the writ of this order.”

Thus, this Court directed the applicants herein to pay simple interest on the delayed payment @ 9% per annum. This Court also directed the applicants to look into the chart provided by the writ applicants Annexure-D page-30 of the main matter.

By this application, the applicants seek review of our order to the limited extent that the directions could not have been for making payment @ 9% per annum but, in fact, it should have been @ 6% per annum as provided under Section 56 of the CGST Act.

“Section56: Interest on Delayed Refunds:

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Explanation: For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).”

Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that no case is made out for review of the order passed by this Court dated 10.07.2019. Having regard to the peculiar facts and circumstances of the case, this Court thought fit to award interest @ 9% per annum.

In view of the above, this application fails and is hereby rejected. Rule is discharged.

Leave a Reply

Your email address will not be published. Required fields are marked *