HC: GST Refund Can’t Be Stopped Because Physical Application U/S 54 Has Been Filed

On the grounds of the physical application for the refund under section 54 of the UP Goods and Service Tax Act, 2017 read with Rule 97-A of the UP GST Rules, 2017, the Allahabad High Court recently directed the GST Department to refund the amount. The Department must pay interest on the reimbursement that was withheld in accordance with Section 56 of the Act, the Court further ruled.

The petitioner was transporting some “beedi” from West Bengal to Haryana while travelling via the state of U.P. On the grounds of incorrect documentation, the truck carrying the goods was impounded in the State of UP.

The goods were seized, and an order was made in accordance with Section 20 (Application of Central Goods and Services Tax Act Provisions) of the IGST Act read in conjunction with Section 129(3) of the UP GST Act, 2017. The petitioner had to pay a total of Rs. 47,32,040 in tax and penalties.

The bank guarantee of the above-said amount was encashed via the department prior to the applicant approaching the first appellate authority. Hence the first appellate authority gives a decision in the applicant’s favour and renders that that amount would be refunded to the applicant. The state never challenged the order.

The applicant’s counsel argued, because of technical issues an application for the GST refund can not get filed on the portal but a physical application was get submitted within the regulatory duration of 60 days. On the decision of the coordinate bench of the Allahabad High Court in Savista Global Solutions Pvt. Ltd. Vs. Union of India & 5 Ors., reliance was placed in which the court witnessed that the taxpayer is not able to file the physical application as long as Rule 97-A of the UP GST Rules, 2017 existed.

Laying on the coordinate bench of Allahabad High Court in M/S Alok Traders Vs. Commissioner Commercial Taxes & 2 Ors, it was contended that the department does not obligate to pay the interest on the amount for the late caused.

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However, Revenue’s legal counsel disagreed with the argument that the Act’s main purpose is to encourage online application submission. It was said that after several requests, the petitioner had not complied.

The judgment of the First Appellate Authority has reached finality, according to a bench made up of Justices Saumitra Dayal Singh and Vinod Diwakar. The sum cannot be legally retained by the state.

The petitioner was obligated to submit an application for a refund in accordance with the Act’s GST Section 54 (Refund of Tax) requirements, and the Authority was required to decide on the application within 60 days (Section 54(7) of the Act), according to the Court’s ruling. Failure to complete the refund within 60 days of the receipt of any such application may result in a 6% interest charge until the refund is paid.

Furthermore, the Court remarked that under Rule 97-A of the UP GST Rules, 2017, the method for filing applications, including applications made manually, is governed by the Rules, 2017. The Court concluded that because the Petitioner filed a refund claim on time, he was entitled to a return including the interest.

Considering the decision of a coordinate bench of the Allahabad High Court in Savista Global Solutions Pvt. Ltd. Vs. Union of India & 5 Ors., the Court ruled that

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“In the first place, there is no contrary opinion existing and perhaps none may arise as the language of the statute as it stands admits of no doubt. As to the filing of the physical/offline application on 02.04.2019, there is no doubt raised by the revenue. Therefore, that application had been filed within the statutory period of two years from the date when the refund became due i.e., upon the first appeal order dated 09.03.2018 being passed. Therefore, the revenue authorities were obligated in law to deal with that application in terms of Section 54(7) of the Act, within a period of 60 days. Failing that, the revenue further became exposed to discharge interest liability on the delay in making the refund at the statutory rate from the end of 60 days from 02.06.2019.”

As per that, the writ petition was permitted.