The Bombay High Court has held that the Petitioner is entitled to interest under Section 56 of the CGST Act for the period beginning with the expiry of 60 days from the date of the shipping bill up to the date of grant of IGST refund.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that Section 56 of the CGST Act provides for the period for which the interest is to be granted, and the said period starts from the date of receipt of an application for refund till the date of refund of such tax. The shipping bill is considered as an application for refund and, therefore, the period for grant of interest would begin on expiry of 60 days from the date of the shipping bill and would continue till the date of refund of such tax.
Table of Contents
Background – IGST Refund Case
The Petitioner/assessee is an exporter and supplier of Ethyl Alcohol Liquid Packaging Film, Iodized salt, etc. On export of the goods, the Petitioner makes payment of Integrated Goods and Services Tax (IGST) and claims the refund of same based on shipping bills as per the provisions of Section 16(3) of IGST Act read with Section 54 of CGST Act and Rule 96 of CGST Rules.
During the period August 2018 to July 2019, the Petitioner filed various shipping bills, which are considered as refund applications and claimed a refund of IGST of Rs.3.21 crore. However, the refund was granted only in August 2020 after constant follow-up with Respondents.
The Petitioner contends that the delay inthe grant of refund is not attributable to her. On enquiry with the Respondents, the Petitioner was informed that thePetitioner’s name was flagged on the “risky exporters list” and, therefore, there was a delay on the part of theRespondents in granting the refund.
The red flag was removed on receipt of NOC from the Risk Management Centre for Customs on 3 August 2020, and the refund was granted.
Arguments
The assessee contended that they were never informed about her name being red-flagged on the portal of Respondents/departmnet, and it is only through enquiry from Respondents that she was informed about the same.
The Petitioner contended that as per Circular No.16 of 2019, dated 17 June 2019, the investigation in cases of names appearing “names red flagged” is to be completed within 30 days and, therefore, at the most, the interest for 30 days during which the investigation ought to have been completed can be excluded for computing interest.Therefore, the Petitioner sought the directions for the Respondents be directed to grant interest for the delay following Section 56 of the CGST Act.
The department contended that as soon as the NOC was received in August 2020 from the Risk Management Centre for Customs, the red flag tag was removed, and the refund was granted. Therefore, there was no delay in the grant of the refund.
Issue Raised
The issue raised was whether the Petitioner is entitled to interest under Section 56 of the CGST Act for the period starting from the expiry of 60 days from the date of filing the shipping bill up to the date of grant of refund, although during the interregnum, the Petitioner’s name was red flagged on the respondents’ portal.
Relevant Provisions – IGST Refund Provision
Section 54 of the CGST Act states that the refund application must be processed within 60 days.
In the instant case, there is no adverse comment against the Petitioner insofar as non-compliance of any information sought bythe Respondent is concerned or deficiency in any documents to be produced for the grant of refund. The delay is squarely attributable to the inaction of the Respondents in not ompleting the investigation within the time frame specified in the Circular, nor is any explanation given as to whythe time limit specified in the Circular could not be complied with or the same attributable to the Petitioner.
Section 56 of the CGST Act provides for interest on delayed refunds and does not provide for excluding the period during which the Respondents are investigating the grant of refund.
the objective of Circular No.16 of 2019 and Circular No.131/1/2020 is to ensure that the investigation in case of a suspicious refund claim is completed within the time frame provided therein so that the exporters can get therefund within the time specified.
It is also important to note that 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-dayrunning of the business. The objective of these Circulars is to make Indian businesses internationally competitive.
Therefore, working capital management is very important. It is keeping in mind this aspect and for ease of doingbusiness that the above-referred Circulars have been issued to complete the investigation within the time framespecified therein.
Conclusion
The court held 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. Therefore, there is no reason why the Petitioner should be denied the interest under Section 56 of the CGST Act for the period of delay attributable to the Respondents.
The court directed the department to grant interest within eight weeks.
Case Details
Case Title: Ms. Anita Agarwal Versus UOI
Case No.: Writ Petition No.1474 Of 2023
Date: 14/11/2024
Counsel For Petitioner: Sriram Sridharan
Counsel For Respondent: Jitendra B. Mishra
