The Gujarat High Court (Ahmedabad Bench) clarified that the provision of Section 56 of the GST Act has a compensatory character and is triggered purely by the lapse of the statutory timeline. The clarification came after finding that the delay in granting a refund to the taxpayer (petitioner) was attributable to a technical glitch, not to any proven documentation inaccuracy or taxpayer omission.
The Court therefore directed the respondent Department to grant the interest on the delayed refund to the petitioners during the pendency of this petition in accordance with law within a period of 12 weeks from the date of receipt of a copy of this order.
The Division Bench comprising Justice Bhargav D. Karia and Justice Pranav Trivedi observed that payment of interest under Section 56 of the GST Act is compulsory for delayed refunds exceeding 60 days from application, regardless of the reason for delay, including technical errors in the GSTN-ICEGATE system, unless the taxpayer is at fault.
Reference was made to the provision of Section 56 of the GST Act, which states that when the taxpayer is not granted the refund as per the provision of Section 54(5) of the GST Act within 60 days from the date of receipt of the refund application, which in the facts of the case is the date of filing of the Shipping Bills, interest is required to be paid to the petitioner-taxpayer.
Briefly, in this case, the petitioner, a manufacturer-exporter of polyester yarn, had filed multiple shipping bills at Hazira Port after paying IGST of Rs 7.53 lacs. Even though the export was successful and the ICEGATE system showed a successful status, the refund was not processed due to a technical error. The petitioner repeatedly sought redress, and by court intervention, the Principal Commissioner manually sanctioned the refund, admitting the technical glitch.
The GST Officials (Respondent), however, declined to pay statutory interest, alleging the delay stemmed from errors in the petitioner’s shipping bills and returns. The petitioner opposed this by contending that the delay in refund was attributable solely to a system error for which there was official acknowledgement, and no specific fault was recorded against the petitioner’s documentation.
Appearances:
Advocates Himanshi Patwa and Anandodaya S. Mishra, for the Petitioner/ Taxpayer
Advocates Ankit Shah and CB Gupta, for the Respondent/ Revenue
