Interest on delayed refund

Case Title: SNG Impex v. Principal Commissioner of Customs

Court: High Court of Gujarat

Petition No.: R/Special Civil Application No. 141 of 2022

Category of Dispute: Refund – Interest on delayed refund of IGST

Date of Judgement: March 9, 2022

Relevant Sections: Section 16 of IGST Act, Section 54(5), Section 56 of CGST Act, 2017, read with Rule 91 & Rule 94 of CGST Rules, 2017

Facts of the Case (Para 1–3):

1. The petitioner, SNG Impex, filed a writ petition under Article 226 seeking a direction to the customs authorities for refund of ₹7,69,093/- of IGST paid on zero-rated export supplies (Para 1).
2. During the pendency of the writ, the refund was eventually sanctioned and disbursed via cheque by the respondents (Para 3).
3. The only surviving grievance was the non-payment of statutory interest on delayed refund, which was legally due under the provisions of the CGST Act (Para 3).

Questions in Consideration (Para 3–4):

• Whether the petitioner is entitled to statutory interest on the delayed payment of refund of IGST under the applicable provisions of the GST Act?
• What should be the rate and period of interest payable?

Observation of the Court (Para 4):

1. The court observed that the issue of interest on delayed refunds is no longer res integra, citing its earlier decision in Amit Cotton Industries v. Principal Commissioner of Customs (2019) 102 taxmann.com 266 (Para 4).
2. It reiterated the liability of the revenue to compensate for delayed refunds as per the statutory scheme at the rate of 7% (Para 4).

Judgement of the Court (Para 4–5):

1. The High Court directed the respondent customs authorities to calculate and pay interest at the rate of 7% on the refunded IGST amount (₹7,69,093) from the date of shipping bills till the date of actual refund payment (Para 4).
2. The said interest was ordered to be paid within six weeks from the date of the order (Para 4).
3. The writ was accordingly disposed of (Para 5).

Between Fine Lines:

• The court reaffirmed exporters’ entitlement to interest on delayed refunds under the GST regime.
• Refunds granted belatedly, even if eventually paid, do not absolve the department of its duty to compensate the delay.
• The applicable interest rate for such delay is 7%, as supported by precedent.
• Reliance on past judgement (Amit Cotton) underscores consistency in judicial reasoning.
• This case strengthens the enforceability of Section 56 of the CGST Act for timely refund redressal.

Summary of Referred Cases

Takeaway:

“Delay May Be Rectified, But Compensation Cannot Be Denied – Interest is Statutory”