Court directs refund of Rs. 1,28,50,535/- with interest in tax writ petition

Case Name:

WRIT TAX No. 113 of 2021 - Savista Global Solutions Private Limited v. Union of India and 5 Others

Key Takeaways:

1. The petitioner filed a writ petition seeking a mandamus to refund an amount of Rs. 1,28,50,535/- that became due under an order passed by respondent no.6.
2. The refund application was filed manually, and although it was processed, the refund was not paid within the stipulated period of sixty days.
3. The court held that the respondents were liable to pay interest at a rate of 6% from the expiry of the sixty-day period until the date of actual payment.
4. The court rejected the respondents’ arguments regarding the mode of filing and processing of the refund application.
5. The court ordered respondent no.6 to refund the entire amount along with interest and gave the respondents the choice to make the payment either through online mode or through a bank draft within one month.

Case Synopsis:

The case is WRIT TAX No. 113 of 2021, with the petitioner being Savista Global Solutions Private Limited and the respondents being Union of India and 5 others. The counsel for the petitioner is Nishant Mishra, Tanmay Sadh, and Yashonidhi Shukla, while the counsel for the respondents is A.S.G.I., C.S.C., Krishna Ji Shukla, and Manu Ghildyal.

The petitioner filed a petition seeking a mandamus to refund Rs. 1,28,50,535/- to the petitioner, which became due under an order dated 06.01.2020 passed by respondent no.6. The refund amount relates to the month of July 2019. The petitioner also requested the payment of interest on the refund amount.

The petitioner filed an application for refund on 27.09.2019 before respondent no.6. Although the application was processed, it was not directed to be paid within the stipulated period of sixty days as per Rule 54(7) (of Income Tax Rules, 1962) of the Central Goods and Services Tax (CGST) Rules, 2017. The order of refund was passed on 06.01.2020, which was beyond the sixty-day period. Therefore, by virtue of Section 56 (of Income Tax Act, 1961) of the Central Goods and Services Tax Act, 2017, interest at the rate of 6% from the date of expiry of the sixty-day period till the date of actual payment of the refund became due.

However, neither the refund amount nor any interest has been paid to the petitioner till date. The respondents were given an opportunity to either pay the entire amount or explain their conduct, but they failed to do so. As a result, the matter proceeded.

After hearing the arguments from both parties and examining the record, the court found that an amount of Rs. 1,28,50,535/- is refundable to the petitioner by respondent no.6 for the month of July 2019. The court also noted that the respondents have exposed themselves to an interest liability of 6% from 27.11.2019 onwards on the admitted refund amount.

The defense set up by the respondents was that respondent no.6 had approved the refund on 06.01.2020 and forwarded the file for actual payment to respondent no.5 on 15.01.2020. Therefore, respondent no.6 claimed no liability to pay interest. Respondent no.5 argued that the refund application and the forwarding letter were moved through physical mode, and therefore, they could not process it. They insisted that the refund details and the refund order should be uploaded on the GST portal through online mode.

The court rejected these contentions, stating that Rule 97A (of Income Tax Rules, 1962) of the Central Goods and Services Tax (CGST) Rules, 2017 allows for manual filing of applications, intimation, reply, declaration, statement, or issuance of notices, orders, or certificates. The subsequent Circular No.125/44/2019-GST, which prescribed the online mode for refund applications, could not override the effect of Rule 97A (of Income Tax Rules, 1962). The court emphasized that once the application had been processed and the order passed, the respondents could not escape the liability of interest.

Therefore, the court ordered respondent no.6 to refund the entire amount of Rs. 1,28,50,535/- along with interest from 27.11.2019 till the date of issuance of the demand draft at a rate of 6%. The respondents were given the choice to make the payment either through online mode or through a bank draft within one month from the date of the order.

The court also left it to respondent nos.5 and 6 to resolve any inter se differences between them so that similar disputes could be resolved in a time-bound manner.

FAQ:

Q1: What was the amount sought to be refunded in the case?

A1: The petitioner sought a refund of Rs. 1,28,50,535/-.

Q2: What was the basis for claiming interest on the refund amount?

A2: The court held that by virtue of Section 56 of the Central Goods and Services Tax Act, 2017, interest at a rate of 6% became due from the expiry of the sixty-day period until the date of actual payment.

Q3: What were the respondents’ arguments regarding the mode of filing and processing of the refund application?

A3: Respondent no.6 claimed that the refund was approved and forwarded for payment, while respondent no.5 argued that the application and forwarding letter were moved through physical mode and insisted on online mode for processing.

Q4: What was the court’s decision regarding the interest liability and refund?

A4: The court held that the respondents were liable to pay interest on the refund amount and ordered respondent no.6 to refund the entire amount along with interest. The respondents were given the choice to make the payment either through online mode or through a bank draft within one month.