Interest of  IGST Refund cannot be denied u/s 56 of DGST/CGST Act, even if not claimed in Refund Application: Delhi HC [Read Order]

The Delhi High Court recently held that  interest of IGST refund could not be denied under section 56 of  DGST/CGST Act, 2017,even if it was not claimed in the refund application.

The  petitioner Raghav Ventures filed the writ petition for seeking direction to the respondent to grant the total IGST refund of Rs. 2,44,75,410/- for the tax period December 2022, February 2023, March 2023 and May 2023 with interest in terms of Section 56 of DGST/CGST Act.

In this case the petitioner  is an exporter of mobile phones of various brands and accessories. Beginning from April 2022, the petitioner has been exporting the mobile phones and its accessories to M/s AZ Logistic Dubai, UAE on payment of Integrated Goods & Service Tax.

During the months December,February  March , May mobiles are exported to India . Thereafter details of export invoices in respect of export of goods contained in Form GSTR-I were transmitted electronically by the common portal to the system designed by the Customs.

Accordingly the system electronically transmits to the common portal a confirmation that the goods covered by the said invoices have been exported out of India, where after, refund is processed by the Customs through ICEGATE in terms of Rule 96 (3).

For this purpose petitioner furnished returns in FORM-GSTR-3B and also submitted applications for refund vide FORM-GST-RFD01.However the IGST refund for the tax period December 2022, February 2023, March 2023 and May 2023 has been sanctioned, but without interest.

During the proceedings,counsel for the petitioner submitted  that refund was credited into his account on 04.12.2023. He gave an application dated 06.12.2023 to the proper officer Department of Trade & Taxes, praying for the grant of interest at the rate of 6% from the date of filing of refund applications till 03.12.2023.

Counsel for respondent argued that FORM-GST-RFD-01, petitioner has only claimed the integrated tax and not the interest on the same and therefore he is not entitled for the grant of interest on the tax amount. 

It was observed that Section 56 of the CGST/DGST Act provides that “if any tax ordered to be refunded under sub-section (5) of Section 54 is not refunded within 60 days from the date of receipt of application under sub-section (1) of that Section, interest at the rate of 6% shall be payable in respect of such refund from the date immediately after the expiry of 60 days from the date of the receipt of the application till the date of refund of such tax”.

The bench observed that Payment of interest under Section 56 of the Act being statutory is automatically payable without any claim, in case the refund is not made within 60 days from the date of receipt of the application. Payment of interest does not depend on the claim made by petitioner and therefore cannot be denied on the ground of waiver on the claim of interest in FORM GST-RFD-01

Therefore the division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja, held that even though, the petitioner may not have claimed interest in his refund applications, his claim of interest cannot be denied under Section 56 of the Act as the same is mandatory and payable automatically in terms of the provisions of the Act.

Mr. Virag Tiwari, Mr. Ramashish & Mr. Rishabh Jain,  advocates Who appeared for the petitioner.

Mr. Rajeev Aggarwal, ASC with Ms. Shaguftha H. Badhmar & Ms. Samridhi Vats, Advocate who  appeared for the revenue.

To Read the full text of the Order CLICK HERE

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