Case Law Details
Flooratex Rubber & Plastics (P) Ltd. Vs Joint Commissioner (General) (Kerala High Court)
Introduction: In a recent judgment, the Kerala High Court directed interest on delayed GST refund to Flooratex Rubber & Plastics (P) Ltd., rejecting portions related to CGST and IGST. The court’s decision on this matter and its legal implications are explored in this article.
Detailed Analysis: Flooratex Rubber & Plastics (P) Ltd. had filed a writ petition challenging the rejection of its GST refund application (Form RFD01A) in 2023. The rejection was based on the contention that the petitioner availed a higher rate of duty drawback during August 2017. While the SGST portion was sanctioned earlier, the CGST and IGST portions were rejected.
The petitioner argued that as per Section 56 of the CGST Act, interest is not payable on the rejected amount. However, the court found the authorities’ contention incorrect, noting that the petitioner was eligible for the SGST portion refund.
Section 56 of the CGST Act specifies that if a tax ordered to be refunded is not repaid within 60 days from the date of the refund application, interest is payable. The petitioner applied for a refund on January 17, 2018, and the refund was recredited on August 10, 2022.
As per the statutory provision, the petitioner is entitled to interest at a rate not exceeding 6% from the date immediately after the expiry of 60 days from the application date until the refund date. The court directed the authorities to calculate and disburse the interest within two months.
Conclusion: The Kerala High Court’s decision in the Flooratex Rubber & Plastics (P) Ltd. case clarifies the entitlement to interest on delayed GST refund. The ruling underscores the importance of adhering to statutory timelines for refund disbursement and sets a precedent for similar cases. Businesses should be vigilant about their refund claims, ensuring timely compliance with the statutory provisions to avoid unnecessary delays and disputes.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Heard Sri.Harisankar V.Menon, learned counsel for the petitioner and Ms. Reshmita Ramachandran, learned Government Pleader, for the respondents.
2. The petitioner has filed the present writ petition seeking to quash Ext.P5 order dated 10.1.2023 issued by the 2nd respondent, whereby the petitioner’s application in Form RFD01A dated 17.1.2018 was rejected on the ground that the refund amount claimed by the petitioner by way of CGST and IGST was inadmissible as the petitioner had availed higher rate of duty draw back during the month of August, 2017. However, the SGST portion was allowed vide order dated 11.5.2020 and the said SGST portion was sanctioned for disbursement. It was also said that, according to Rule 93(1) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’, for short) the rejected amount of refund of IGST and CGST portion was to be recredited to the credit ledger of the petitioner, after getting an affidavit under Rule 93(2) of the Rules from the petitioner/tax payer stating that they would not file any suit against the IGST and CGST portion, after recrediting the amount to the credit ledger. The delay in recrediting the rejected refund claim was due to the technical gliches faced in the old back end portal and after implementation of model 2 back end portal, the amount was recredited to the credit ledger on 10.8.2022. It was further said that the petitioner had filed an application claiming interest on the recredited amount. The recredited amount was the claim of refund, which was rejected by the proper officer. As per Section 56 of the CGST Act, interest was not payable to the amount rejected by the authorities.
3. However, this contention of the authorities in Ext.P5 does not appear to be correct, inasmuch as the petitioner was found to be eligible for refund of the SGST portion of Rs.38,52,046/-, as mentioned in paragraph No.4(b) of the counter affidavit filed on behalf of the respondents. Paragraph No.4(b) of the counter affidavit, on re-production, reads as under:
“4. The facts of the case leading to the present writ petition are as follows:
a. xxx xxx xxx
b. That, it is pertinent that the petitioner had claimed both duty drawback of central taxes paid as well as for the unutlized input tax against zero rated supply. The petitioner’s claim for refund for the month of August 2017 was for an amount of Rs.78,30,281.00 (IGST – Rs.1,26,189, CGST Rs.38,52,046 and SGST – Rs. 38,52,046). On verification of application with reference to Section 54, the amount eligible for refund was found to be only SGST portion of Rs.38,52,046. The IGST and CGST portion were found to be inadmissible and hence rejected. On 11.02.2020 an amount of Rs.3,02,085.00 being the eligible SGST was released vide order in form GST RFD 06 dated 11.02.2020.”
4. Section 56 of the CGST Act, which makes provision for interest on delayed refunds, reads as under:
56. Interest on delayed refunds.— If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant 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 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 under the said sub-section till the date of refund of such tax:
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).
5. Thus, from a bare perusal of Section 56 of the CGST Act, it is evident that if any eligible tax amount ordered to be refunded under subsection (5) of section 54 is not refunded within sixty (60) days from the date of receipt of application, interest at such rate not exceeding six per cent is to be given, as may be specified in the notification to be issued by the Government on the recommendations of the Council. The petitioner had made application for refund on 17.1.2018 and refund has been granted/recredited vide order dated 8.2022.
6. As per the provisions of Section 56, the petitioner is entitled for interest @ 6% on the amount ordered to be refunded from the date of expiry of sixty (60) days from the date of the application for refund, i.e. 17.1.2018, till the date of refund/credit to petitioner’s credit ledger, as per notification No. 9/2017 dated 28.6.2017.
7. In view of the above, Ext.P5 order rejecting petitioner’s claim for interest on the tax amount ordered to be refunded is quashed and the respondents are directed to calculate the interest on the amount, which was refunded/credited to the petitioner’s cash credit ledger, as directed above, and disburse the same within a period of two months from today.
With the aforesaid direction, the present writ petition stands finally disposed of. Pending interlocutory application, if any, in the present writ petition stands dismissed.
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