Madras High Court (HC) in the case of Razack Trading Company, W.P.(MD) No.15302 of 2022. The Court held that interest is liable to be paid on erroneous GST-ITC refund where ITC was wrongly availed.
Facts
·
The Petitioner wrongly availed ITC on Basic Customs
Duty (‘BCD’) paid during pre-GST period. The same ITC was transitioned by
filing TRAN-1 in the GST period. The Petitioner then claimed refund for the
same, which was also sanctioned by the Department.
·
Subsequently, the Department directed the petitioner
to pay erroneous refund along with interest and penalty.
·
The Petitioner argued that there is no interest
levying provision for erroneous refund under GST laws.
HC Decision
·
The Hon’ble HC interpreted the expression ‘along
with interest payable thereon under section 50’ used under Section 73
and 74.
·
Based on above expression in Section 73 & 74, the
Court concluded that restitution (compensation) is provided under GST laws for
erroneous refund.
| Comments
·
We believe that the decision of the
Hon’ble Court may be challenged. It is well settled, judicially, that interest
cannot be levied without any specific imposition under any tax law.
·
Further, the expression ‘along with
interest payable thereon under section 50’ does not denote levy of
interest. In strict legal sense, the expression is merely a provision ‘by
reference’. It is only Section 50 which deal with levy of interest and
there is no levy on erroneous refund. Thus, in our humble view, interest cannot
be levied on erroneous refund under GST law.
·
Having said above, one interesting angle
which the Court may have thought but not reflected in the order is ‘Restitution
under the common law’. While submitting the refund, sometimes the officer
asks for undertakings and bonds that if refund is found to be erroneous, it
will be paid back along with interest. In such cases, interest can be decided
based on such bond or undertaking, under the common law.
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