Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(SC) 356

SUPREME COURT OF INDIA
UDAY UMESH LALIT, S. RAVINDRA BHAT, JJ.
Union Of India & Ors. - Appellants
Versus
M/s. Willowood Chemicals Pvt. Ltd. & Anr. - Respondents
Civil Appeal Nos.2995-2996 of 2022 (Arising out of Special Leave to Appeal (C) Nos. 7312-7313 of 2022) @ Special Leave Petition (C) Diary No.27099 of 2020
With
Union Of India & Ors. - Appellants
Versus
M/s. Saraf Natural Stone & Anr. - Respondents
Civil Appeal Nos. 2997-2998 of 2022
(Arising out of Special Leave to Appeal (C) Nos. 7314-7315 of 2022) @ Special Leave Petition (C) Diary No.28455 of 2020
Decided on : 19-04-2022

Advocates appeared:
For the Petitioner(s): Mr. N. Venkataraman, ASG Mr. Akshay Amritanshu, Adv. Mr. Merusagar Samantray, Adv. Ms. Indira Bhakar, Adv. Mr. Manish, Adv. Mr. M.K. Maroria, AOR Mr. B. Krishna Prasad, AOR
For the Respondent(s): Mr. Ravi Bharuka, AOR Mr. Ankit Agarwal, Adv.

The interest would be payable in terms of the provisions of the statute and any delay in paying the compensation or the amounts due would attract award of interest at a reasonable rate on equitable grounds. The court held that the interest would be awarded at the rate of 6 per cent as per the principal provision of Section 56 of the CGST Act. The award of interest at a rate exceeding 6 per cent would be attracted only if the matter was covered by the proviso to the said Section 56.

Headnote:
Interest Rate - Refund of Tax - [Interest Rate] - [IGST Act, Section 56], [CGST Act, Section 54] - The court considered the delay in making refunds and the applicable statutory provisions. The court clarified that interest would be payable in terms of the provisions of the statute and that any delay in paying the compensation or the amounts due would attract award of interest at a reasonable rate on equitable grounds. The court held that the interest would be awarded at the rate of 6 per cent as per the principal provision of Section 56 of the CGST Act. The award of interest at a rate exceeding 6 per cent would be attracted only if the matter was covered by the proviso to the said Section 56. The High Court was in error in awarding interest at the rate exceeding 6 per cent in the instant matters.
Fact of the Case:

The cases involved delay in making refunds of tax, ranging from 94 to 290 days. The High Court awarded interest at a rate exceeding 6 per cent, contrary to the principal provision of Section 56 of the CGST Act.
Finding of the Court:

The court clarified that interest would be payable in terms of the provisions of the statute and that any delay in paying the compensation or the amounts due would attract award of interest at a reasonable rate on equitable grounds. The court held that the interest would be awarded at the rate of 6 per cent as per the principal provision of Section 56 of the CGST Act. The award of interest at a rate exceeding 6 per cent would be attracted only if the matter was covered by the proviso to the said Section 56. The High Court was in error in awarding interest at the rate exceeding 6 per cent in the instant matters.
Issues: The main issue was the rate of interest payable on delayed refunds of tax, considering the delay ranging from 94 to 290 days. The court clarified that interest would be payable in terms of the provisions of the statute and that any delay in paying the compensation or the amounts due would attract award of interest at a reasonable rate on equitable grounds.
Ratio Decidendi: The court clarified that interest would be payable in terms of the provisions of the statute and that any delay in paying the compensation or the amounts due would attract award of interest at a reasonable rate on equitable grounds. The court held that the interest would be awarded at the rate of 6 per cent as per the principal provision of Section 56 of the CGST Act. The award of interest at a rate exceeding 6 per cent would be attracted only if the matter was covered by the proviso to the said Section 56. The High Court was in error in awarding interest at the rate exceeding 6 per cent in the instant matters.
Final Decision: The court allowed the appeals and directed that the original writ petitioners would be entitled to interest at the rate of 6 per cent per annum on amounts that they were entitled by way of refund of tax. Since the concerned amounts along with interest at the rate of 6 per cent per annum have already been made over to them, nothing further need be done in both the cases.

JUDGMENT :

Uday Umesh Lalit, J.

1. Delay condoned. Leave granted.

2. Appeal arising out of Special Leave Petition (C) Diary No.27099 of 2020 is directed against the judgment and order dated 10.07.2019 passed by the High Court¹[High Court of Gujarat at Ahmedabad.] in Special Civil Application No.18591 of 2018 and against the order dated 13.03.2020 passed in Review Petition arising therefrom being Misc. Civil Application No.1 of 2019. (For facility, hereinafter referred to as, “the first case”)

Appeal arising out of Special Leave Petition (C) Diary No.28455 of 2020 is directed against the judgment and order dated 10.07.2019 passed by the High Court in Special Civil Application No.15925 of 2018 and against the order dated 13.03.2020 passed in Review Petition arising therefrom being Misc. Civil Application No.1 of 2019. (For facility, hereinafter referred to as, “the second case”)

3. The second case arises out of a Writ Petition, being Special Civil Application No.15925 of 2018 filed by M/s. Saraf Natural Stone submitting inter alia that:

2.6 The Petitioner further states that Section 16(3) of the IGST Act, provides that refund should be claimed in accordance with the provisions of Section 54 of the CGST Act³[The Central Goods and Services Tax Act, 2017] or the rules made thereunder. Section 20 of the IGST Act further provides that provisions of CGST Act relating to refunds shall, mutatis mutandis, apply, so far as may be, in relation to Integrated tax as they apply in relation to central tax as if they are enacted under this Act.

2.7. The Petitioners further states that Rule 2 of the Integrated Goods and Services Tax Rules, 2017 provides that the Central Goods and Services Tax Rules, 2017, for carrying out the provisions specified in Section 20 of the Integrated Goods and Services Tax Act, 2017 shall, so far as may be, apply in relation to Integrated tax as they apply in relation to Central tax.

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2.15 The petitioner further states that the Central Government vide Notification No.13/2017-Central Tax, dated 28.06.2017 and Notification No.6/2017 – integrated tax dated 28.06.2017 has fixed the rate of interest from the 1st day of July, 2017 at 6% p.a. and 9% p.a. for the purposes of Section 56 and proviso to Section 56 of CGST Act, 2017 respectively. Copies of the aforesaid notifications are enclosed herewith marked at Annexure & and Annexure B respectively.

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2.19 The petitioner states further that it received the refund of integrated tax paid on export of goods after substantial period of delay. Details of refund claimed, date of application of refund and actual date of grant of refund for the month of July is enclosed herewith and marked as Annexure-D”

3.1 Details of 15 (Fifteen) refunds made to said writ petitioner showed that there was delay ranging from 94 to 290 days.

3.2 In the circumstances it was prayed inter alia:-

“a) to issue writ of mandamus and/ or any other appropriate writ(s) for directions is the Respondents for providing appropriate compensation as well as interest, for delay in the granting of refund;”

4. The first case arises out of Special Civil Application No.18591 of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd. submitting that said Writ Petitioner was entitled on the basis of Section 16 of the IGST Act read with Section 54 of the CGST Act for compensation in receipt of delayed payment as detailed in Annexure D of the petition, which in turn dealt with 12 refunds with delay ranging between 94 to 290 days. The special civil application had thus prayed for appropriate compensation.

5. In both the petitions it was submitted that inaction leadi