The Gujarat High Court recently made an important ruling regarding the payment of statutory interest under the Goods and Services Tax Act, 2017.
According to the court’s decision, interest is mandatorily payable on delayed refunds of Integrated Goods and Services Tax (IGST) if the refund is not processed within sixty days from the date it becomes due. This ruling clarifies the rights of taxpayers regarding timely refunds and the associated interest.
Vineet Polyfab Pvt. Ltd. is the company of the applicant, which is an exporter that had submitted 5 shipping Bills of polyester drawn texturised yarn at Hazira Port and paid IGST of ₹7,53,469 on the exported goods.
The filing has been approved by the system and sanctioned the refund with the success status code “SB000” being indicated. But the refund was not processed automatically via the Indian Customs Electronic Data Interchange System (ICES) due to a technical error.
After that, the system has exhibited the refund amount to be paid before the applicant as NIL, hence averting the refund. The applicant tried to solve the issue by writing multiple letters to the DG Systems and the Saksham Seva Help Desk authorities. However, their efforts were unsuccessful, which has led to the current special civil application being filed before the Gujarat High Court.
The court, for their submissions, has been admired by Himanshi Patwa and Anandodaya S. Mishra, appearing for the applicant, and Ankit Shah, C.B. Gupta appeared for the Union of India and the GST authorities.
The Division Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi cited that the refund delay was not attributable to the applicant but was directed via a system-generated error under the customs procedure.
The Principal Commissioner should manually process the refund post-filing the petition, specifying the administrative lapse. After that, the High Court denied the claim of the department that the filing errors in the GSTR of the applicant had been generated due to the delay. But they are unsuccessful in demonstrating any material proof for the same.
The Gujarat High Court referred to Section 56 of the GST Act to note that interest on late refunds is an obligatory and compensatory duty that appears automatically after 60 days from the date of receipt of the refund application. Till there is no caution on the exporter, the department cannot stop the IGST.
The Court referred to its own ruling in Panji Engineering Pvt. Ltd. v. Union of India (2023) and the Apex Court ruling in Ranbaxy Laboratories Ltd. v. Union of India (2011), where it was held that the interest provision is compensatory and cannot be refused once the refund delay surpasses the statutory period.
As per that, the bench asked the GST authorities to pay the interest on the late refund within 12 weeks from the date of receipt of the order.
| Case Title | Vineet Polyfab Pvt. Ltd. & Anr. vs. Union of India & Ors |
| Case No. | WRIT PETITION NO. 3000 OF 2023 |
| For Petitioner | Ms Himanshi Patwa, Mr Anandodaya S Mishra |
| For Respondent | Mr Ankit Shah and Mr CB Gupta |
| Gujarat High Court | Read Order |
