Bansal International vs Commissioner Of Dgst & Anr. on 21 November, 2023

1. Outcome
The High Court allowed the petition, setting aside the impugned order dated 11.07.2023. The Adjudicating Authority was directed to process the petitioner's application for interest, in accordance with the Court's decision, implying that the petitioner is entitled to interest on the delayed refund.

2. Core Issue
The principal controversy was whether the period for which interest is payable under Section 56 of the DGST/CGST Act commences from the date immediately after the expiry of sixty days from the receipt of the first application for refund, or from a later date, in cases where the refund is initially denied but subsequently allowed by an Appellate Authority or court. This involved interpreting the main provision and the proviso of Section 56 regarding the commencement date and applicable interest rates (6% vs 9%).

3. Key Facts
* 06.02.2020: Petitioner (Bansal International) filed an application for a refund of Input Tax Credit (ITC) of ₹53,92,516/- for goods exported in November 2019.
* 30.07.2020: Application acknowledged, and a Show Cause Notice was issued proposing to reject the claim.
* 10.11.2020: Adjudicating Authority (AA) sanctioned ₹1,08,293/- but rejected the remaining ₹52,84,223/-, citing no inward supply to the petitioner's supplier (M/s Suvidha Enterprises) due to non-generation of E-way Bills.
* Appeal: Petitioner appealed this rejection.
* Appellate Authority's Order: Found in favour of the petitioner, confirming supplies to M/s Suvidha Enterprises, and set aside the AA's rejection. It directed the petitioner to file a fresh refund application and the AA to process it, but denied interest.
* 23.11.2022: Petitioner filed a second application (RFD-01) for the balance refund of ₹52,84,223/- and interest.
* 28.12.2022: AA sanctioned the refund amount but denied interest.
* 03.01.2023: Refund amount of ₹52,84,223/- credited to the petitioner's account.
* 16.05.2023: Petitioner filed an application claiming interest of ₹13,12,761/- at 9% per annum.
* 11.07.2023: The AA rejected the interest application (impugned order), holding that interest was payable only if the refund was not made within sixty days from the receipt of the application filed pursuant to the Appellate Authority's order, and since it was processed within this period, no interest was due.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Bansal International):

  • The Adjudicating Authority misinterpreted Section 56 of the DGST Act.
  • Entitled to interest immediately after the expiry of sixty days from the date of the first application for refund (06.02.2020).
  • The initial incorrect denial of the refund by the proper officer, subsequently rectified on appeal, should not defeat the right to interest from the original delay.
  • Appellate proceedings are a continuation of the original proceedings, and orders from appellate authorities are "deemed to be" orders under Section 54(5) as per the Explanation to Section 56.
  • Interest is a measure to compensate for the denial of funds.

• Revenue (Commissioner of DGST & Anr.):

  • The grant of interest is a statutory right, not an equitable one, and must be strictly in accordance with the statute.
  • Rule 89(2)(a) of the Rules requires a separate application for refund claims arising from an order passed by an Appellate Authority/Tribunal/Court.
  • The proviso to Section 56 read with Rule 89(2)(a) indicates that interest runs from the date immediately after the expiry of sixty days from the date of the subsequent application filed pursuant to the appellate order.
  • Since the refund was processed within 60 days of the second application (23.11.2022), no interest was payable under Section 56.

5. Court’s Reasoning
* Interpretation of Section 56 (Main Provision): A plain reading shows that interest accrues from the date immediately after 60 days from the receipt of the first application under Section 54(1) of the CGST Act (which must be complete in all respects). The taxpayer's entitlement cannot be defeated merely because the proper officer initially passed an incorrect order.
* Appellate Proceedings: Appellate proceedings are a continuation of the original proceedings. An order passed by an Adjudicating Authority merges with the order of the Appellate Authority/Tribunal/Court. The Explanation to Section 56 clarifies that orders passed by appellate fora upholding a refund claim are deemed to be orders passed under Section 54(5).
* Absurd Result: Accepting the Revenue's contention would lead to an absurd result where the time spent in appellate remedies would disentitle the taxpayer from a refund altogether if the two-year limitation period for filing the first application (Section 54(1)) had passed during the appeal.
* Object of Interest: Interest is a compensation for the denial of legitimately due funds. The period of compensation should not be diluted by the time taken in appellate processes.
* Interpretation of Proviso to Section 56: A proviso must be read in conjunction with the main clause and not as an independent enactment. It typically carves out an exception or qualifies the main provision. In this case, the proviso does not negate the interest payable under the main provision but addresses a specific situation: an enhanced rate of interest (9% instead of 6%) for the period commencing from the date immediately after 60 days from the receipt of the subsequent application filed consequent to an appellate order attaining finality.
* Dual Interest Rates: The Court clarified that the applicant is entitled to interest at 6% per annum from a date immediately after the expiry of 60 days from the first application under Section 54(1). If, after successful appeal, a second application is filed and the refund is further delayed beyond 60 days from this second application, then the enhanced rate of 9% per annum applies for that subsequent period of delay. The second application is merely for convenience to retrigger the disbursal process, not a fresh adjudication.
* Conclusion: The interest at 6% is payable from 60 days after the initial refund application until 60 days after the application filed consequent to the appellate order. For any delay after this latter 60-day period, the interest rate becomes 9%.

6. Statutory References
* Delhi Goods and Services Tax Act, 2017 (DGST Act): Section 56
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 54 (Refund of tax) - Sub-sections (1), (4), (5), (7), (8), Explanation (2)
* Section 56 (Interest on delayed refunds) - Main provision, proviso, and Explanation
* Section 107 (Appeals to Appellate Authority) - Sub-section (11)
* Section 112 (Appeals to Appellate Tribunal)
* Section 117 (Appeal to High Court)
* Central Goods & Services Tax Rules, 2017 (Rules):
* Rule 89 (Application for refund of tax, interest, penalty, fees or any other amount) - Sub-rules (1), (2) (especially clause (a)), (3), (4)
* Rule 90 (Acknowledgement) - Sub-rules (1), (2), (3)

7. Precedents Cited
* State of Kerela v. K.M Charia Abdullah & Co: AIR 1965 SC 1585 (Appellate proceedings as continuation of original)
* Gojer Bros Pvt Ltd v Ratan Lal Singh: (1974) 2 SCC 453 (Appellate proceedings as continuation of original)
* Union of India Through Director of Income Tax v. M/s Tata Chemicals Ltd.: (2014) 6 SCC 335 (Interest as compensation)
* Modi Industries Ltd., Modi Nagar & Ors. v. Commissioner of Income Tax, Delhi & Anr.: (1995) 6 SCC 396 (Statutory vs. equitable interest)
* Godavari sugar Mills Ltd. v. State of Maharashtra & Ors.: (2011) 2 SCC 439 (Statutory vs. equitable interest)
* Union of India & Ors. v. Willowood Chemicals Pvt Ltd. & Anr. (2022) 9 SCC 341 (Statutory vs. equitable interest)
* Dwarka Prasad v. Dwarka Das Saraf: (1976) 1 SCC 128 (Interpretation of proviso)
* Union of India & Ors. v. VKC Footsteps (India) (P) Ltd.: (2022) 2 SCC 603 (Interpretation of proviso, citing several other cases on proviso interpretation: Mullins v. Treasurer of the County of Surrey, Madras & Southern Mahratta Railway Co. Ltd. v. Bezwada Municipality, Local Govt. Board v. South Stoneham Union, Shah Bhojraj Kuverji Oil Mills & Ginning Factory v. Subbash Chandra Yograj Sinha, CIT v. Indo-Mercantile Bank Ltd., Ram Narain Sons Ltd. v. CST)
* SBI Cards & Payment Services Ltd. v. Union of India: CWP-1851/2022 decided on 06.01.2023 (Similar interpretation and application of Section 56).