IMPORTANT POINT
Interest on delayed refunds under the CGST Act is automatic and obligatory, reinforcing the beneficial nature of the legislation.

ORDER :

(P. Sam Koshy, J.)

These two writ petitions have been filed by the two establishments where the question of law needs adjudication is, whether the petitioners herein are entitled for interest under Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as ‘CGST Act, 2017’) on the delayed granting of refund of Input Tax Credit (for short, ‘ITC’) claimed under Section 54 of the CGST Act, 2017.

2. Heard Mr. Karan Talwar, learned counsel for the petitioner, Mr. Swaroop Oorilla, learned Special Government Pleader for State tax for the respondent Nos.1, 2 and 3; and Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India for the respondent No.4.

3. The broad facts, for convenience without referring to the dates as the issues are in common, are that, the petitioners had filed a refund claim petition before the respondents claiming for refund of the unutilized ITC. Upon raising the said claim, the respondents issued a deficiency memo to which the petitioners promptly replied. Subsequently, show causes notices were issued to which also the petitioners replied and finally orders were passed rejecting the refund claims. The rejection of the refund claims was subjected to challenge in the appeals and the appeals filed by the petitioners were substantially allowed and refund amounts were also disbursed.

4. Later on the petitioners moved applications with the respondents requesting them for grant of interest on the amount refunded by them for the period it was withheld by the Department resulting in delayed releasing. In spite of persistent efforts by the petitioners, the interest on the delayed refunded amount was not granted. The request finally stood rejected by the Department vide orders dated 09.05.2022 and 19.02.2023 respectively, which are under challenge in the instant writ petitions.

5. It is in this factual backdrop that the question of law which needs adjudication has been framed as is reflected in the initial part of this order.

6. For proper understanding of the dispute, it would be more appropriate at this juncture to take note of the provision of Section 56 of the CGST Act, 2017, which for ready reference is reproduced herein under:

“56. Interest on delayed refunds

If any tax ordered to be refunded under sub-section (5) of section 54 to any application is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government of the recommendations of the Council shall be payable in respect of such refund [for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed]:

PROVIDED that where any claim of refund arises from an order passed by an Adjudicating Authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Explanation : For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).”

From plain reading of the aforesaid Section there is absolutely no ambiguity so far as the intention, object and purpose of enactment of the said provision. The heading of the sai