Interest at 9% on delayed refund can be granted on account of an order of court or tribunal
Facts and issue of the case
Willowood Chemicals was engaged in the exports of goods without payment of duty and claimed the refund application of unutilized ITC of inputs and inputs services . 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. Respondent filed a writ petition before The High Court asking for interest at 9% for such inordinate delay.
The High Court considered the rival submissions in light of the statutory provisions and relied upon certain decisions including the decision of this Court in K.T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka4 , Sandvik Asia Ltd. v. Commissioner of Income Tax-I Pune and others5 and Commissioner ofIncome Tax, Gujarat v. Gujarat Fluoro Chemicals6 . In its judgment dated 10.7.2019 which is under challenge in the second case, the High Court concluded:
The position of law appears to be well settled. The provisions relating to an interest of delated payment of refund have been consistently held as beneficial and nondiscriminatory. It is true that in the taxing statute the principles of equity may have little role to play, but at the same time, any statute in taxation matter should also meet with the test of constitutional provision.
The respondents have not explained in any manner the issue of delay as raised by the writ applicants by filing any reply.
The chart indicating the delay referred to above speaks for itself.
In the overall view of the matter, we are inclined to hold the respondents liable to pay simple interest on the delayed payment at the rate of 9% per annum. The authority concerned shall nook into the chart provided by the writ-applicants, which is at Page-30, Annexure-D to the writ application and calculate the aggregate amount of refund. On the aggregate amount of refund, the writ-applicants are entitled to 9% per annum interest from the date of filing of the GSTR-03. The respondents shall undertake this exercise at the earliest and calculate the requisite amount toward the interest. Let this exercise be undertaken and completed within a period of two months from the date of receipt of the writ of this order. The requisite amount towards the interest shall be paid to the writ-applicants within a period of two months form the date of receipt of the writ of this order.”
Being Aggrieved by the decision appellant filed this Special Appeal to Supreme Court
Observation of Court
The appellants do not dispute the eligibility of the respondents for receiving interest for delayed payment of claims but their submission is that in terms of the relevant statutory provision, the interest could be awarded at the rate of 6 per cent and not 9 per cent per annum. Considering the stand taken by the appellants, at the interim stage, this Court directed the appellants to make good payment of interest at the rate of 6 per cent. Accordingly, the amounts representing interest at that rate have since then been made over.
The relevant provision has prescribed rate of interest at 6 per cent where the case for refund is governed by the principal provision of Section 56 of the CGST Act. As has been clarified by this Court in Modi Industries Ltd.9 and Godavari Sugar Mills Ltd. 7 wherever a statute specifies or regulates the interest, the interest will be payable in terms of the provisions of the statute. Wherever a statute, on the other hand, is silent about the rate of interest and there is no express bar for payment of interest, any delay in paying the compensation or the amounts due, would attract award of interest at a reasonable rate on equitable grounds.
It is precisely for this reason that paragraph 9 of the decision in Godavari Sugar Mills Ltd.7 accepted the submission made by the learned counsel for the respondents and confined the rate of interest to the prescription made in the statute. The award of interest at a rate in excess of what was prescribed by the statute was only for a period beyond 20 years where the matter was not strictly covered by the statute and as such it would be in the realm of discretion of the Court. It must also be noted here that the inordinate delay of up to 17 years in making refunds was a special circumstance when this Court was persuaded to accept grant of interest at the rate of 9 per cent per annum in Sandvik Asia Ltd.5 Even while doing so, the observations made by this Court in Paragraph 48 of the decision are quite clear that “the award of interest in refund and amount must be as per the statutory provisions of law and whenever a specific provision has been made under the statute such provision has to govern the field.” The subsequent decision of the bench of three Judges in Gujarat Fluoro Chemicals6 noticed that the grant of interest at the rate of 9 per cent was in the facts of the case in Sandvik Asia Ltd.
Since the delay in the instant case was in the region of 94 to 290 days and not so inordinate as was the case in Sandvik Asia Ltd. 5 , the matter has to be seen purely in the light of the concerned statutory provisions. In terms of the principal part of Section 56 of the CGST Act, the interest would be awarded at the rate of 6 per cent. The award of interest at 9 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
Conclusion
Supreme Court held that High Court had erred in granting at 9% interest on delayed refund , and the respondent is entitled to interest at the rate 6% per annum only .
Union-Of-India-vs.-Willwood-Chemicals-Pvt-Ltd
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