[Section 56 CGST Act, 2017] Taxpayers Are Eligible To Claim Interest On Delayed Refunds: Gujarat High Court

Considering that the provisions of Section 56 of the Central Goods and Services Tax Act, 2017 are unambiguous and mandatory, the Gujarat High Court upheld the entitlement of taxpayers to claim interest on delayed refunds under the provisions of Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The Division bench of Justice Vipul M. Pancholi and Justice Devan M. Desai observed that “pending this petition, the respondent authority has released the refund to the petitioner except the refund involved in the Shipping Bill No.8723678 dated 17.02.2021. However, the respondent authority has not granted interest on the delayed refunds, which according to this Court, is against the provisions of Section 56 of the Central Goods and Services Tax Act, 2017. Petitioner is entitled to interest on delayed refund”.

Advocate Hardik P. Modh appeared for the Petitioner, whereas Advocate Utkarsh R. Sharma appeared for the Respondent.

The brief facts of the case were that according to M/s. Panji Engineering Private Limited (petitioner), had availed input tax credit as per the provisions of the CGST Act on goods and services used in the manufacture of submersible pumps, which were subsequently supplied in India and exported abroad. The petitioner filed the necessary forms and paid the IGST amount, but their refund was not sanctioned as per the provisions of the Integrated Goods and Services Tax Act (IGST Act). Despite lodging grievances and sending reminders, the petitioner received no response from the authorities, and their complaint was closed without granting a refund. However, during the proceedings, the petitioner stated that except for the refund involved in a specific shipping bill, they had received the IGST refund for the exported goods. However, the refund in question was yet to be received, and the petitioner claimed entitlement to interest under Section 56 of the CGST Act since the refund was not sanctioned within 60 days from the application date.

After considering the submission, the Bench observed that the provisions of Section 56 were clear and mandatory, entitling the petitioner to claim interest on delayed refunds.

Since the Authorities failed to grant interest on the delayed amounts, the Bench deemed such an act of the authorities to be contrary to the provisions of the law.

Therefore, considering the totality of the facts and developments during the proceedings, the High Court directed the concerned authority to release the refund to the petitioner, associated with the Shipping Bill No.8723678 dated 17.02.2021 and grant interest on the delayed refunds as per the provisions of the law.

Cause Title: M/s. Panji Engineering Private Limited v. Union of India [Neutral Citation: 2023: GUJHC: 34716-DB]

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