Supreme Court of India
UNION OF INDIA & ORSversusM/S. WILLOWOOD CHEMICALS PVT. LTD. & ANR.
- Citation
- 2022 INSC 430
- Decided
- 19 April 2022
- Disposal
- Appeal(s) allowed
- Bench
- UDAY UMESH LALIT
Holding
Interest on the delayed refunds is payable at the rate of 6% per annum under the principal provision of Section 56 of the CGST Act, and the High Court's award of 9% interest was erroneous.
Summary
Willowood Chemicals and another filed writ petitions alleging that the Union of India delayed refunds of integrated tax on exports for periods ranging from 94 to 290 days, violating Sections 16 and 20 of the IGST Act and Sections 54 and 56 of the CGST Act. The Gujarat High Court awarded simple interest at 9% per annum on the delayed refunds, invoking the proviso to Section 56. The appellants challenged this award before the Supreme Court, contending that the principal provision of Section 56 prescribes interest not exceeding 6% unless the refund arises from an order of an adjudicating authority or tribunal. The Court examined the statutory scheme, held that the refunds in question fell within the principal part of Section 56 and therefore the applicable rate is 6% per annum. Consequently, the High Court's award of 9% interest was set aside and the appeals were allowed, confirming interest at 6% and noting that the amounts with such interest had already been paid. No further order as to costs was made.
Issues considered
- Whether interest on delayed GST refunds under Section 56 of the CGST Act is payable at 6% or 9% per annum in the present cases.
- Whether the proviso to Section 56, which authorises 9% interest, applies to refunds arising from applications under Sections 54 and 56 without an adjudicating authority's order.
Legislation cited
- Central Goods and Services Tax Act, 2017s. 54, s. 56
- Income Tax Act, 1961s. 214
- Integrated Goods and Services Tax Act, 2017s. 16, s. 20
Subjects
GSTrefundinterestSection 56CGST ActIGST Actwrit petitiondelayed refundstatutory interest
Judgment
1138 [2022] REPORTS
SUPREME COURT 14 S.C.R. 1138 [2022] 14 S.C.R.
A UNION OF INDIA & ORS.
v.
M/S. WILLOWOOD CHEMICALS PVT. LTD. & ANR.
(Civil Appeal Nos. 2995-2996 of 2022)
B APRIL 19, 2022
[UDAY UMESH LALIT AND S. RAVINDRA BHAT, JJ.]
Integrated Goods and Services Tax Act, 2017 – ss. 16 and 20
– Central Goods and Services Act, 2017 – ss. 54 and 56 – Interest
on delayed refunds – Writ petitioners claimed that inaction on part
C
of appellant leading to inordinate delay in granting refunds under
IGST Act, was per se arbitrary and impacted the working capacity
of the writ petitioners thereby reducing their ability to conduct
business – There was delay ranging from 94 to 290 days in making
refunds – Petitioners before the High Court claimed that appropriate
D compensation ought to be awarded to them along with the interest
for delayed refunds – High Court granted simple interest at the rate
of 9 % per annum on the delayed payments – Appeal before the
Supreme Court – Whether in terms of relevant statutory provisions,
the petitioners are entitled to interest on delayed refunds at rate of
6 % and not at the rate of 9 % per annum – Held : Wherever a
E
statute specifies or regulates the interest, the interest will be payable
in terms of the provisions of the Statute – Wherever a statute, is
silent about the rate of interest and there is no express bar of payment
of interest, any delay in paying the compensation or the amounts
due, would attract award of interest at a reasonable rate on equitable
F grounds – In the present case, the relevant provision has prescribed
rate of interest at 6 % where the case for refund is governed by the
principle provision of s. 56 of the CGST Act – Since the delay in the
instant case was in the range of 94 to 290 days, the matter has to be
seen purely in the light of the concerned statutory provision – Present
cases have not arisen from any order passed by an Adjudicating
G
Authority or Appellate Authority or Appellate Tribunal or Court
and the cases are strictly within the scope of the principal provision
of Section 56 and not under the proviso thereof – Therefore, in
terms of the principle part of s. 56 of the CGST Act, the interest
would be awarded at the rate of 6 % – The award of interest at 9 %
H would be granted only if the matter was covered by the proviso to s.
1138
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1139
PVT. LTD. & ANR.
56 – High Court was in error in awarding interest at the rate A
exceeding 6 % in the present matters.
Allowing the appeals, the Court
HELD: 1. According to Section 56 of the CGST Act, if an
applicant is not refunded any tax ordered to be refunded by the
Proper Officer under Section 54(5) within 60 days from the receipt B
of the application, interest at such rate not exceeding 6 per cent
would become payable after the expiry of 60 days from the date
of receipt of application till the date of refund of such tax. The
proviso to said Section prescribes that where any claim of refund
arises from an order passed by an Adjudicating Authority or C
Appellate Authority or Appellate Tribunal or Court and if the same
is not refunded within 60 days from the date of receipt of an
application filed consequent to such an order, the rate of interest
payable would be 9 per cent. [Para 12][1153-E-G]
2. The instant cases have not arisen from any order passed D
by an Adjudicating Authority or Appellate Authority or Appellate
Tribunal or Court and the cases are strictly within the scope of
the principal provision of Section 56 and not under the proviso
thereof. [Para 13][1153-G-H]
3. The relevant provision has prescribed rate of interest at E
6 per cent where the case for refund is governed by the principal
provision of Section 56 of the CGST Act. Wherever a statute
specifies or regulates the interest, the interest will be payable in
terms of the provisions of the statute. Wherever a statute, on
the other hand, is silent about the rate of interest and there is no
express bar for payment of interest, any delay in paying the F
compensation or the amounts due, would attract award of interest
at a reasonable rate on equitable grounds. [Para 18][1165-B-D]
4. Since the delay in the instant case was in the region of 94
to 290 days the matter has to be seen purely in the light of the
concerned statutory provisions. In terms of the principal part of G
Section 56 of the CGST Act, the interest would be awarded at the
rate of 6 per cent. The award of interest at 9 per cent would be
attracted only if the matter was covered by the proviso to the
H
1140 SUPREME COURT REPORTS [2022] 14 S.C.R.
A said Section 56. The High Court was in error in awarding interest
at the rate exceeding 6 per cent in the instant matters. [Para
19][1165-G-H]
K. T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka
(2011) 9 SCC 1 : [2011] 13 SCR 636 – distinguished.
B Union of India and others v. Orient Enterprises and
Another (1998) 3 SCC 501 : [1998] 2 SCR 143; Modi
Industries Ltd. and another v. Commissioner of Income
Tax and Another (1995) 6 SCC 396 : [1995] 3 Suppl.
SCR 642 – relied on.
C Sandvik Asia Ltd. v. Commissioner of Income Tax-I Pune
and Others (2006) 2 SCC 508 : [2006] 1 SCR 811;
Commissioner of Income Tax, Gujarat v. Gujarat Fluoro
Chemicals (2014) 1 SCC 126 : [2013] 10 SCR 191 –
referred to.
D Case Law Reference
[2011] 13 SCR 636 distinguished Para 6
[2006] 1 SCR 811 referred to Para 6
[2013] 10 SCR 191 referred to Para 6
E [1998] 2 SCR 143 relied on Para 14
[1995] 3 Suppl. SCR 642 relied on Para 16A
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2995-
2996 of 2022.
F From the Judgment and Order dated 13.03.2020 of the High Court
of Gujarat at Ahmedabad in Misc. Civil Application(for Review) No. 1
of 2020 in R/Special Civil Application No.18591 of 2018 and Order dated
10.07.2019 in R/Special Civil Application No. 18591 of 2018.
With
G
Civil Appeal Nos. 2997-2998 of 2022.
N. Venkataraman, ASG, Akshay Amritanshu, Merusagar
Samantray, Ms. Indira Bhakar, Manish, M. K. Maroria, Advs. for the
Appellants.
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1141
PVT. LTD. & ANR.
Vinay Shraff, Ravi Bharuka, Ankit Agarwal, Advs. for the A
Respondent.
The Judgment of the Court was delivered by
UDAY UMESH LALIT, J.
1. Delay condoned. Leave granted. B
2. Appeal arising out of Special Leave Petition (C) Diary No.27099
of 2020 is directed against the judgment and order dated 10.07.2019
passed by the High Court1 in Special Civil Application No.18591 of 2018
and against the order dated 13.03.2020 passed in Review Petition arising
therefrom being Misc. Civil Application No.1 of 2019. (For facility, C
hereinafter referred to as, “the first case”)
Appeal arising out of Special Leave Petition (C) Diary No.28455
of 2020 is directed against the judgment and order dated 10.07.2019
passed by the High Court1 in Special Civil Application No.15925 of 2018
and against the order dated 13.03.2020 passed in Review Petition arising D
therefrom being Misc. Civil Application No.1 of 2019. (For facility,
hereinafter referred to as, “the second case”)
3. The second case arises out of a Writ Petition, being Special
Civil Application No.15925 of 2018 filed by M/s. Saraf Natural Stone
submitting inter alia that:
E
“2.5 The Petitioner states that in terms of Section 16 of the IGST
Act2, 2017, a registered person making exports of goods
outside India, shall be eligible to claim, refund of either
unutilized input tax credit on export of goods under bond or
letter of undertaking or refund of Integrated tax paid on
F
export of goods.
2.6 The Petitioner further states that Section 16(3) of the IGST
Act, provides that refund should be claimed in accordance
with the provisions of Section 54 of the CGST Act 3 or the
rules made thereunder. Section 20 of the IGST Act further
provides that provisions of CGST Act relating to refunds G
shall, mutatis mutandis, apply, so far as may be, in relation
1
High Court of Gujarat at Ahmedabad.
2
The Integrated Goods and Services Tax Act, 2017
3
The Central Goods and Services Tax Act, 2017 H
1142 SUPREME COURT REPORTS [2022] 14 S.C.R.
A to Integrated tax as they apply in relation to central tax as if
they are enacted under this Act.
2.7. The Petitioners further states that Rule 2 of the Integrated
Goods and Services Tax Rules, 2017 provides that the
Central Goods and Services Tax Rules, 2017, for carrying
B out the provisions specified in Section 20 of the Integrated
Goods and Services Tax Act, 2017 shall, so far as may be,
apply in relation to Integrated tax as they apply in relation
to Central tax.
*** *** ***
C 2.15 The petitioner further states that the Central Government
vide Notification No.13/2017- Central Tax, dated 28.06.2017
and Notification No.6/2017 – integrated tax dated 28.06.2017
has fixed the rate of interest from the 1st day of July, 2017
at 6% p.a. and 9% p.a. for the purposes of Section 56 and
D proviso to Section 56 of CGST Act, 2017 respectively.
Copies of the aforesaid notifications are enclosed herewith
marked at Annexure & and Annexure B respectively.
*** *** ***
2.19 The petitioner states further that it received the refund of
E integrated tax paid on export of goods after substantial period
of delay. Details of refund claimed, date of application of
refund and actual date of grant of refund for the month of
July is enclosed herewith and marked as Annexure-D”
3.1 Details of 15 (Fifteen) refunds made to said writ petitioner
F showed that there was delay ranging from 94 to 290 days.
3.2 In the circumstances it was prayed inter alia:-
“a) to issue writ of mandamus and/ or any other appropriate
writ(s) for directions is the Respondents for providing
appropriate compensation as well as interest, for delay in
G the granting of refund;”
4. The first case arises out of Special Civil Application No.18591
of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd. submitting that
said Writ Petitioner was entitled on the basis of Section 16 of the IGST
Act read with Section 54 of the CGST Act for compensation in receipt
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1143
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
of delayed payment as detailed in Annexure D of the petition, which in A
turn dealt with 12 refunds with delay ranging between 94 to 290 days.
The special civil application had thus prayed for appropriate compensation.
5. In both the petitions it was submitted that inaction leading to
inordinate delay in granting refunds was per se arbitrary and that the
inordinate delay impacted the working capacity of the Writ Petitioners B
thereby reducing their ability to conduct business and as such appropriate
compensation ought to be awarded along with interest for delay.
The submissions were opposed by the learned counsel appearing
for the Revenue.
6. The High Court considered the rival submissions in light of the C
statutory provisions and relied upon certain decisions including the decision
of this Court in K.T. Plantation Pvt. Ltd. and Anr. v. State of
Karnataka4, Sandvik Asia Ltd. v. Commissioner of Income Tax-I
Pune and others5 and Commissioner of Income Tax, Gujarat v.
Gujarat Fluoro Chemicals6. In its judgment dated 10.7.2019 which is D
under challenge in the second case, the High Court concluded:
“22. The position of law appears to be well settled. The provisions
relating to an interest of delated payment of refund have been
consistently held as beneficial and non-discriminatory. It is true
that in the taxing statute the principles of equity may have little E
role to play, but at the same time, any statute in taxation matter
should also meet with the test of constitutional provision.
23. The respondents have not explained in any manner the issue
of delay as raised by the writ applicants by filing any reply.
24. The chart indicating the delay referred to above speaks for F
itself.
25. In the overall view of the matter, we are inclined to hold the
respondents liable to pay simple interest on the delayed payment
at the rate of 9% per annum. The authority concerned shall nook
into the chart provided by the writ-applicants, which is at Page- G
30, Annexure-D to the writ application and calculate the aggregate
amount of refund. On the aggregate amount of refund, the writ-
4
(2011) 9 SCC 1
5
(2006) 2 SCC 508
6
(2014) 1 SCC 126 H
1144 SUPREME COURT REPORTS [2022] 14 S.C.R.
A applicants are entitled to 9% per annum interest from the date of
filing of the GSTR-03. The respondents shall undertake this
exercise at the earliest and calculate the requisite amount toward
the interest. Let this exercise be undertaken and completed within
a period of two months from the date of receipt of the writ of this
order. The requisite amount towards the interest shall be paid to
B
the writ-applicants within a period of two months form the date of
receipt of the writ of this order.”
7. The first case was then disposed of on the same day with the
following observations:-
C “4. For the reasons assigned in the Special Civil Application
No15925 of 2018, decided on 10/07/2019, this writ application is
allowed to the extent that the writ applicants are entitled to the
interest for the delayed payment at the rate of 9% per annum.
The authority concerned shall look into the chart provided by the
writ applicants, which is at Page 30, Annexure D to the writ
D application and calculate the aggregate refund, the writ applicants
are entitled to 9% per annum interest from the date of filing of the
GSTR38. The respondents shall undertake this exercise at the
earliest and calculate the requisite amount towards interest. Let
this exercise be undertaken and completed within a period of two
E months from the date of receipt of the writ of this order. The
requisite amount towards the interest shall be paid to the writ
applicants within a period of two months from the date of receipt
of the writ of this order.”
8. The appellant being aggrieved, preferred Review Petitions in
F both the cases. It was submitted inter alia:
“4. It is respectfully submitted that this Hon’ble Court has directed
the respondent authority to pay simple interest on the delayed
payment at the rate of 9% per annum from the date of filing of
the GSTR-3B.
G 5. It is respectfully submitted that as per section 56 of the IGST
Net Interest at the rate of not exceeding six percent may be given
whereas by order dated 10.07.2011 this Hon’ble court was pleased
to give interest at the rate of 9%.”
By separate orders dated 13.3.2020 passed in both the cases, the
H Review Petitions preferred by the appellant were dismissed.
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1145
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
9. The aforestated judgments and orders passed by the High Court A
are under challenge in these appeals. The appellants do not dispute the
eligibility of the respondents for receiving interest for delayed payment
of claims but their submission is that in terms of the relevant statutory
provision, the interest could be awarded at the rate of 6 per cent and not
9 per cent per annum. Considering the stand taken by the appellants, at
B
the interim stage, this Court directed the appellants to make good payment
of interest at the rate of 6 per cent. Accordingly, the amounts representing
interest at that rate have since then been made over.
10. We have heard Mr. N. Venkataraman, learned Additional
Solicitor General on behalf of the appellants in both the matters while
Mr. Vinay Shraff, learned Advocate appeared for the respondents in C
both the cases.
11. Before we deal with the controversy in question, we may
extract the relevant statutory provisions: -
A) Sections 16 and 20 of the IGST Act are as follows:-
D
“16. Zero rated supply - (1) “zero rated supply” means any of the
following supplies of goods or services or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic
Zone developer or a Special Economic Zone unit. E
(2) Subject to the provisions of sub-section (5) of section 17 of
the Central Goods and Services Tax Act, credit of input tax may
be availed for making zero-rated supplies, notwithstanding that
such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible F
to claim refund under either of the following options, namely:––
(a) he may supply goods or services or both under bond or Letter
of Undertaking, subject to such conditions, safeguards and
procedure as may be prescribed, without payment of integrated
tax and claim refund of unutilized input tax credit; or G
(b) he may supply goods or services or both, subject to such
conditions, safeguards and procedure as may be prescribed, on
payment of integrated tax and claim refund of such tax paid on
goods or services or both supplied.
*** *** *** H
1146 SUPREME COURT REPORTS [2022] 14 S.C.R.
A 20. Subject to the provisions of this Act and the rules made
thereunder, the provisions of Central Goods and Services Tax Act
relating to,––
(i) scope of supply;
(ii) composite supply and mixed supply;
B
(iii) time and value of supply;
(iv) input tax credit;
(v) registration;
(vi) tax invoice, credit and debit notes;
C
(vii) accounts and records;
(viii) returns, other than late fee;
(ix) payment of tax;
D (x) tax deduction at source;
(xi) collection of tax at source;
(xii) assessment;
(xiii) refunds;
E (xiv) audit;
(xv) inspection, search, seizure and arrest;
(xvi) demands and recovery;
(xvii) liability to pay in certain cases;
F (xviii) advance ruling;
(xix) appeals and revision;
(xx) presumption as to documents;
(xxi) offences and penalties;
G
(xxii) job work;
(xxiii) electronic commerce;
(xxiv) transitional provisions; and
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1147
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
(xxv) miscellaneous provisions including the provisions relating to A
the imposition of interest and penalty,
shall, mutatis mutandis, apply, so far as may be, in relation to
integrated tax as they apply in relation to central tax as if they are
enacted under this Act:
Provided that in the case of tax deducted at source, the B
deductor shall deduct tax at the rate of two per cent. from the
payment made or credited to the supplier:
Provided further that in the case of tax collected at source,
the operator shall collect tax at such rate not exceeding two per
cent, as may be notified on the recommendations of the Council, C
of the net value of taxable supplies:
Provided also that for the purposes of this Act, the value of
a supply shall include any taxes, duties, cesses, fees and charges
levied under any law for the time being in force other than this
Act, and the Goods and Services Tax (Compensation to States) D
Act, if charged separately by the supplier:
Provided also that in cases where the penalty is leviable
under the Central Goods and Services Tax Act and the State Goods
and Services Tax Act or the Union Territory Goods and Services
Tax Act, the penalty leviable under this Act shall be the sum total E
of the said penalties.
Provided also that in cases where the appeal is to be filed
before the Appellate Authority or the Appellate Tribunal, the
maximum amount payable shall be fifty crore rupees and one
hundred crore rupees respectively.” F
(B) Sections 54 and 56 of the CGST Act are as under:-
“54. Refund of tax - (1) Any person claiming refund of any tax
and interest, if any, paid on such tax or any other amount paid by
him, may make an application before the expiry of two years
from the relevant date in such form and manner as may be G
prescribed:
Provided that a registered person, claiming refund of any balance
in the electronic cash ledger in accordance with the provisions of
sub-section (6) of section 49, may claim such refund in the return
furnished under section 39 in such manner as may be prescribed. H
1148 SUPREME COURT REPORTS [2022] 14 S.C.R.
A (2) A specialised agency of the United Nations Organisation or
any Multilateral Financial Institution and Organisation notified under
the United Nations (Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries or any other person or
class of persons, as notified under section 55, entitled to a refund
of tax paid by it on inward supplies of goods or services or both,
B
may make an application for such refund, in such form and manner
as may be prescribed, before the expiry of six months from the
last day of the quarter in which such supply was received.
(3) Subject to the provisions of sub-section (10), a registered person
may claim refund of any unutilised input tax credit at the end of
C any tax period:
Provided that no refund of unutilised input tax credit shall be allowed
in cases other than––
(i) zero rated supplies made without payment of tax;
D (ii) where the credit has accumulated on account of rate of tax on
inputs being higher than the rate of tax on output supplies (other
than nil rated or fully exempt supplies), except supplies of goods
or services or both as may be notified by the Government on the
recommendations of the Council:
E Provided further that no refund of unutilised input tax credit shall
be allowed in cases where the goods exported out of India are
subjected to export duty:
Provided also that no refund of input tax credit shall be allowed, if
the supplier of goods or services or both avails of drawback in
F respect of central tax or claims refund of the integrated tax paid
on such supplies.
(4) The application shall be accompanied by—
(a) such documentary evidence as may be prescribed to establish
that a refund is due to the applicant; and
G
(b) such documentary or other evidence (including the documents
referred to in section 33) as the applicant may furnish to establish
that the amount of tax and interest, if any, paid on such tax or any
other amount paid in relation to which such refund is claimed was
collected from, or paid by, him and the incidence of such tax and
H interest had not been passed on to any other person:
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1149
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
Provided that where the amount claimed as refund is less than A
two lakh rupees, it shall not be necessary for the applicant to
furnish any documentary and other evidences but he may file a
declaration, based on the documentary or other evidences available
with him, certifying that the incidence of such tax and interest had
not been passed on to any other person.
B
(5) If, on receipt of any such application, the proper officer is
satisfied that the whole or part of the amount claimed as refund is
refundable, he may make an order accordingly and the amount so
determined shall be credited to the Fund referred to in section 57.
(6) Notwithstanding anything contained in sub-section (5), the C
proper officer may, in the case of any claim for refund on account
of zero-rated supply of goods or services or both made by
registered persons, other than such category of registered persons
as may be notified by the Government on the recommendations
of the Council, refund on a provisional basis, ninety per cent. of
the total amount so claimed, excluding the amount of input tax D
credit provisionally accepted, in such manner and subject to such
conditions, limitations and safeguards as may be prescribed and
thereafter make an order under sub-section (5) for final settlement
of the refund claim after due verification of documents furnished
by the applicant. E
(7) The proper officer shall issue the order under sub-section (5)
within sixty days from the date of receipt of application complete
in all respects.
(8) Notwithstanding anything contained in sub-section (5), the
refundable amount shall, instead of being credited to the Fund, be F
paid to the applicant, if such amount is relatable to—
(a) refund of tax paid on export of goods or services or both or on
inputs or input services used in making such exports;
(b) refund of unutilized input tax credit under sub-section (3);
G
(c) refund of tax paid on a supply which is not provided, either
wholly or partially, and for which invoice has not been issued, or
where a refund voucher has been issued;
(d) refund of tax in pursuance of section 77;
H
1150 SUPREME COURT REPORTS [2022] 14 S.C.R.
A (e) the tax and interest, if any, or any other amount paid by the
applicant, if he had not passed on the incidence of such tax and
interest to any other person; or
(f) the tax or interest borne by such other class of applicants as
the Government may, on the recommendations of the Council, by
B notification, specify.
(8A) The Government may disburse the refund of the State tax in
such manner as may be prescribed.
(9) Notwithstanding anything to the contrary contained in any
judgment, decree, order or direction of the Appellate Tribunal or
C any court or in any other provisions of this Act or the rules made
thereunder or in any other law for the time being in force, no
refund shall be made except in accordance with the provisions of
sub-section (8).
(10) Where any refund is due under sub-section (3) to a registered
D person who has defaulted in furnishing any return or who is
required to pay any tax, interest or penalty, which has not been
stayed by any court, Tribunal or Appellate Authority by the
specified date, the proper officer may—
(a) withhold payment of refund due until the said person has
E furnished the return or paid the tax, interest or penalty, as the
case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or
any other amount which the taxable person is liable to pay but
which remains unpaid under this Act or under the existing
F law. Explanation.––For the purposes of this sub-section, the
expression “specified date” shall mean the last date for filing an
appeal under this Act.
(11) Where an order giving rise to a refund is the subject matter
of an appeal or further proceedings or where any other proceedings
G under this Act is pending and the Commissioner is of the opinion
that grant of such refund is likely to adversely affect the revenue
in the said appeal or other proceedings on account of malfeasance
or fraud committed, he may, after giving the taxable person an
opportunity of being heard, withhold the refund till such time as he
may determine.
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1151
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
(12) Where a refund is withheld under sub-section (11), the taxable A
person shall, notwithstanding anything contained in section 56, be
entitled to interest at such rate not exceeding six per cent. as may
be notified on the recommendations of the Council, if as a result
of the appeal or further proceedings he becomes entitled to refund.
(13) Notwithstanding anything to the contrary contained in this B
section, the amount of advance tax deposited by a casual taxable
person or a non-resident taxable person under sub-section (2)
of section 27, shall not be refunded unless such person has, in
respect of the entire period for which the certificate of registration
granted to him had remained in force, furnished all the returns
required under section 39. C
(14) Notwithstanding anything contained in this section, no refund
under sub-section (5) or sub-section (6) shall be paid to an
applicant, if the amount is less than one thousand rupees.
Explanation.—For the purposes of this section,–– D
(1) “refund” includes refund of tax paid on zero-rated supplies of
goods or services or both or on inputs or input services used in
making such zero-rated supplies, or refund of tax on the supply of
goods regarded as deemed exports, or refund of unutilised input
tax credit as provided under sub-section (3). E
(2) “relevant date” means—
(a) in the case of goods exported out of India where a refund of
tax paid is available in respect of goods themselves or, as the case
may be, the inputs or input services used in such goods,––
F
(i) if the goods are exported by sea or air, the date on which the
ship or the aircraft in which such goods are loaded, leaves India;
or
(ii) if the goods are exported by land, the date on which such
goods pass the frontier; or
G
(iii) if the goods are exported by post, the date of despatch of
goods by the Post Office concerned to a place outside India;
(b) in the case of supply of goods regarded as deemed exports
where a refund of tax paid is available in respect of the goods, the
date on which the return relating to such deemed exports is H
furnished;
1152 SUPREME COURT REPORTS [2022] 14 S.C.R.
A (c) in the case of services exported out of India where a refund
of tax paid is available in respect of services themselves or, as the
case may be, the inputs or input services used in such services,
the date of––
(i) receipt of payment in convertible foreign exchange 3 ”or in
B Indian rupees wherever permitted by the Reserve Bank of India”,
where the supply of services had been completed prior to the
receipt of such payment; or
(ii) issue of invoice, where payment for the services had been
received in advance prior to the date of issue of the invoice;
C (d) in case where the tax becomes refundable as a consequence
of judgment, decree, order or direction of the Appellate Authority,
Appellate Tribunal or any court, the date of communication of
such judgment, decree, order or direction;
(e) in the case of refund of unutilised input tax credit under clause
D (ii) of the first proviso to sub-section (3), the due date for furnishing
of return under section 39 for the period in which such claim for
refund arises;
(f) in the case where tax is paid provisionally under this Act or the
rules made thereunder, the date of adjustment of tax after the
E final assessment thereof;
(g) in the case of a person, other than the supplier, the date of
receipt of goods or services or both by such person; and
(h) in any other case, the date of payment of tax. Refund in certain
cases.
F
*** *** ***
56. Interest on delayed refunds - If any tax ordered to be refunded
under sub-section (5) of section 54 to any applicant is not refunded
within sixty days from the date of receipt of application under
G subsection (1) of that section, interest at such rate not exceeding
six per cent. as may be specified in the notification issued by the
Government on the recommendations of the Council shall be
payable in respect of such refund from the date immediately after
the expiry of sixty days from the date of receipt of application
under the said sub-section till the date of refund of such tax:
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1153
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
Provided that where any claim of refund arises from an order A
passed by an adjudicating authority or Appellate Authority or
Appellate Tribunal or court which has attained finality and the
same is not refunded within sixty days from the date of receipt of
application filed consequent to such order, interest at such rate
not exceeding nine per cent. as may be notified by the Government
B
on the recommendations of the Council shall be payable in respect
of such refund from the date immediately after the expiry of sixty
days from the date of receipt of application till the date of refund.
Explanation.––For the purposes of this section, where any order
of refund is made by an Appellate Authority, Appellate Tribunal or
any court against an order of the proper officer under sub-section C
(5) of section 54, the order passed by the Appellate Authority,
Appellate Tribunal or by the court shall be deemed to be an order
passed under the said sub-section (5)”
12. These provisions show that a registered person making export
of goods outside India, is entitled in terms of Section 16 of the IGST Act D
to claim refund of either unutilized input tax credit of export of goods
under bond or letter of undertaking or refund of integrated tax paid on
export of goods. In terms of Section 20 of the IGST Act, any claim for
refund is to be governed by the provisions of the CGST Act which would
apply mutatis mutandis as if they were enacted in the IGST Act. The E
application for refund, therefore, is required to be preferred in accordance
with Section 54 of the CGST Act. According to Section 56 of the CGST
Act, if an applicant is not refunded any tax ordered to be refunded by
the Proper Officer under Section 54(5) within 60 days from the receipt
of the application, interest at such rate not exceeding 6 per cent would
become payable after the expiry of 60 days from the date of receipt of F
application till the date of refund of such tax. The proviso to said Section
prescribes that where any claim of refund arises from an order passed
by an Adjudicating Authority or Appellate Authority or Appellate Tribunal
or Court and if the same is not refunded within 60 days from the date of
receipt of an application filed consequent to such an order, the rate of G
interest payable would be 9 per cent.
13. The instant cases have not arisen from any order passed by
an Adjudicating Authority or Appellate Authority or Appellate Tribunal
or Court and the cases are strictly within the scope of the principal
provision of Section 56 and not under the proviso thereof. In light of H
1154 SUPREME COURT REPORTS [2022] 14 S.C.R.
A these provisions, the question which arises for consideration is whether
the High Court was justified in awarding interest at the rate of 9 per cent
per annum.
14. Before we deal with the question, it must be stated that initially
a bench of two Judges of this Court in Union of India and others v.
B Orient Enterprises and Another7 had observed that a Writ Petition
under Article 226 of the Constitution filed solely for relief for payment of
interest on delayed refund would not be maintainable. For facility, the
relevant portion from the said decision is quoted here:
“6. In Suganmal [AIR 1965 SC 1740 : 56 ITR 84 : 16 STC 398]
C this Court has laid down that a writ petition under Article 226 of
the Constitution solely praying for the issue of a writ of mandamus
directing the State to refund the money is not ordinarily
maintainable for the simple reason that a claim for such a refund
can always be made in a suit against the authority which had
illegally collected the money as a tax. This Court has made a
D distinction between a direction for refund given by way of
consequential order in a case where the legality of the assessment
is questioned and a case where the petition is only for the purpose
of seeking refund. It has been observed:
“We do not consider it proper to extend the principle
E justifying the consequential order directing the refund of amount
illegally realised, when the order under which the amounts had
been collected has been set aside, to cases in which only orders
for the refund of money are sought. The parties had the right
to question the illegal assessment orders on the ground of their
F illegality or unconstitutionality and, therefore, could take action
under Article 226 for the protection of their fundamental right,
and the courts, on setting aside the assessment orders, exercised
their jurisdiction in proper circumstances to order the
consequential relief for the refund of the tax illegally realised.
We do not find any good reason to extend this principle and,
G therefore, hold that no petition for the issue of a writ of
mandamus will be normally entertained for the purpose of
merely ordering a refund of money to the return of which the
petitioner claims a right.”
7
H (1998) 3 SCC 501
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1155
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
7. The Court has emphasised that there was no legal right in the A
appellant who had filed the writ petition to claim the refund under
the relevant statute.
8. In the present case also till the insertion of Section 27-A in the
Act by Act 22 of 1995 there was no right entitling payment of
interest on delayed refund under the Act. Such a right was B
conferred for the first time by the said provision. Act 22 of 1995
also inserted Section 28-AA which provides for payment of interest
on delayed payment of duty by a person who is liable to pay the
duty. Thus at the relevant time there was no statutory right entitling
the respondents to payment of interest on delayed refund and the
writ petition filed by them was not for the enforcement of a legal C
right available to them under any statute. The claim for interest
was in the nature of compensation for wrongful retention by the
appellants of money that was collected from the respondents by
way of customs duty, redemption fine and penalty. In view of the
law laid down by this Court in Suganmal [AIR 1965 SC 1740: 56 D
ITR 84: 16 STC 398] a writ petition seeking the relief of payment
of interest on delayed refund of the amount so collected could
not, in our opinion, be maintained. The decisions on which reliance
has been placed by Shri Rawal were cases where the legality of
the orders requiring payment of tax or duty were challenged and
the High Court in exercise of its jurisdiction under Article 226 of E
the Constitution, while setting aside the said orders, has directed
the refund of the amount so collected with interest. The direction
for payment of interest in these cases was by way of consequential
relief along with the main relief of setting aside the order imposing
the tax or duty. Those cases stand on a different footing and have F
no application to the present case. The appeal is, therefore,
allowed, the impugned judgment of the High Court is set aside
and the writ petition filed by the respondents before the High
Court is dismissed. No order as to costs.”
15. However, subsequently another bench of two Judges of this G
Court in Godavari Sugar Mills Ltd. 7 in more or less identical
circumstances settled the issue and found the Writ Petition to be
maintainable. The observations of this Court were:
“7. The High Court relying upon the decision of this Court
in Suganmal v. State of M.P. [AIR 1965 SC 1740] has held that H
1156 SUPREME COURT REPORTS [2022] 14 S.C.R.
A the prayer in the writ petition being one for payment of interest, it
should be considered to be a writ petition filed to enforce a money
claim and therefore, not maintainable. The observations
in Suganmal [AIR 1965 SC 1740] related to a claim for refund
of tax and have to be understood with reference to the nature of
the claim made therein. The decision in Suganmal [AIR 1965
B
SC 1740] has been explained and distinguished in several
subsequent cases, including in U.P. Pollution Control
Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABL
International Ltd. v. Export Credit GuaranteeCorpn. of India
Ltd. [(2004) 3 SCC 553] The legal position becomes clear when
C the decision in Suganmal [AIR 1965 SC 1740] is read with the
other decisions of this Court on the issue, referred to below:
(i) Normally, a petition under Article 226 of the Constitution
of India will not be entertained to enforce a civil liability arising
out of a breach of a contract or a tort to pay an amount of money
D due to the claimants. The aggrieved party will have to agitate the
question in a civil suit. But an order for payment of money may
be made in a writ proceeding, in enforcement of statutory
functions of the State or its officers. (Vide Burmah
Construction Co. v. State of Orissa [AIR 1962 SC 1320 : 1962
Supp (1) SCR 242] .)
E
(ii) If a right has been infringed—whether a fundamental
right or a statutory right—and the aggrieved party comes to the
Court for enforcement of the right, it will not be giving complete
relief if the Court merely declares the existence of such right or
the fact that existing right has been infringed. The High Court,
F while enforcing fundamental or statutory rights, has the power to
give consequential relief by ordering payment of money realised
by the Government without the authority of law. (Vide State of
M.P. v. Bhailal Bhai [AIR 1964 SC 1006].)
(iii) A petition for issue of writ of mandamus will not
G normally be entertained for the purpose of merely ordering a refund
of money, to the return of which the petitioner claims a right. The
aggrieved party seeking refund has to approach the civil court for
claiming the amount, though the High Courts have the power
to pass appropriate orders in the exercise of the power
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1157
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
conferred under Article 226 for payment of money. A
(Vide Suganmal v. State of M.P. [AIR 1965 SC 1740])
(iv) There is a distinction between cases where a
claimant approaches the High Court seeking the relief of
obtaining only refund and those where refund is sought as a
consequential relief after striking down the order of B
assessment, etc. While a petition praying for mere issue of a writ
of mandamus to the State to refund the money alleged to have
been illegally collected is not ordinarily maintainable, if the allegation
is that the assessment was without a jurisdiction and the taxes
collected was without authority of law and therefore the
respondents had no authority to retain the money collected without C
any authority of law, the High Court has the power to direct refund
in a writ petition. (Vide Salonah Tea Co. Ltd. v. Supdt. of
Taxes [(1988) 1 SCC 401 : 1988 SCC (Tax) 99 (2)]
(v) It is one thing to say that the High Court has no power
under Article 226 of the Constitution to issue a writ of mandamus D
for making refund of the money illegally collected. It is yet another
thing to say that such power can be exercised sparingly depending
on facts and circumstances of each case. For instance, where
the facts are not in dispute, where the collection of money was
without the authority of law and there was no case of undue E
enrichment, there is no good reason to deny a relief of refund to
the citizens. But even in cases where collection of cess, levy or
tax is held to be unconstitutional or invalid, refund is not an automatic
consequence but may be refused on several grounds depending
on facts and circumstances of a given case. (Vide U.P. Pollution
Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549]) F
(vi) Where the lis has a public law character, or involves a
question arising out of public law functions on the part of the
State or its authorities, access to justice by way of a public law
remedy under Article 226 of the Constitution will not be denied.
(Vide Sanjana M. Wig v. Hindustan Petroleum Corporation G
Ltd. (2005) 8 SCC 242)
We are therefore of the view that reliance upon Suganmal
was misplaced to hold that the writ petition filed by the appellant
was not maintainable.”
H
1158 SUPREME COURT REPORTS [2022] 14 S.C.R.
A 16. We, therefore, proceed to consider the merits. Turning to the
basic question it must be noted that in the following cases, this Court
dealt with the question as to payment of interest on the amount due by
way of refund:
(A) In Modi Industries Ltd. and another v. Commissioner of
B Income Tax and Another8 a bench of three Judges of this Court was
called upon to consider the effect of Section 214 of the Income Tax Act,
1961, and the questions which arose were set out as under:
“We shall now indicate how the controversy relating to the meaning
of the expression “regular assessment” arises: an assessee pays
C advance tax according to his estimate of his income during the
financial year relevant to the particular assessment year. He then
files a return and an assessment is made under Section 143. It is
found that he has paid more amount by way of advance tax than
the amount of tax assessed. He will be refunded the extra amount
with interest calculated from the first day of April of that
D assessment year to the date of assessment. No difficulty arises in
such a case. The difficulty arises in the following situation: indeed
it is one of the many situations - not satisfied with the order of
assessment, the assessee files an appeal. The appeal is allowed
as a consequence of which, the assessment order is revised. As a
E result of such revised assessment made pursuant to the appellate
order, the tax refundable to the assessee becomes larger - say
whereas, according to the original assessment he was entitled to
refund of Rs.10,000/-, he becomes entitled to a total refund of
Rs.15,000/- as a result of revised assessment made pursuant to
the appellate order. The question is - on what amount and upto
F which date is the interest payable? On being elaborated, the
question yields the following sub-questions:
(a) is the interest payable only on Rs. 10,000/- and if so, whether
the interest is payable till the date of first/original assessment or
till the date of the revised assessment?
G
(b) is the interest payable on Rs.15,000/- and if payable, is it payable
only till the date of first/original assessment or till the date of the
revised assessment?
8
H (1995) 6 SCC 396
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1159
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
After considering various decisions on the point, the conclusion A
drawn by the Court was:
“The argument, which was upheld in some of the cases now under
appeal, is that it will be inequitable if the assessee does not get
interest on the amount of advance tax paid, when the amount paid
in advance is refunded pursuant to an appellate order. This is not B
a question of equity. There is no right to get interest on refund
except as provided by the statute. The interest on excess amount
of advance tax under Section 214 is not paid from the date of
payment of the tax. Nor is it paid till the date of refund. It is paid
only upto the date of the regular assessment. No interest is at all
paid on excess amount of tax collected by deduction at source. C
Before introduction of Section 244(1A) the assessee was not
entitled to get any interest from the date of payment of tax upto
the date of the order as a result of which excess realisation of tax
became refundable. Interest under Section 243 or Section 244 was
payable only when the refund was not made within the stipulated D
period upto the date of refund. But, if the assessment order was
reduced in appeal, no interest was payable from the date of
payment of tax pursuant to the assessment order to the date of
the appellate order.
Therefore, interpretation of Section 214 or any other section E
of the Act should not be made on the assumption that interest has
to be paid whenever an amount which has been retained by the
tax authority in exercise of statutory power becomes refundable
as a result of any subsequent proceeding.
(Emphasis supplied) F
(B) In Godavari Sugar Mills Ltd.7, a bench of two Judges of
this Court considered the question whether interest on the compensation
amount at the rate of 9 per cent per annum could be awarded when the
terms of Section 6 of the Maharashtra Agriculture Lands (Ceiling of
Holdings) Act, 1961 prescribed payment of interest only at the rate of 3 G
per cent per annum. The discussion on the point was:
“9. There is considerable force in the submissions of Ms Madhavi
Divan, the learned counsel for the respondents that the decisions
of the Bombay High Court in Krishnakumar [WP No. 83 of 1986
decided on 29-6-1991 (Bom)] and Changdeo [WP No. 3805 of
H
1160 SUPREME COURT REPORTS [2022] 14 S.C.R.
A 2000 decided on 7-7-2000 (Bom)] are not sound, as they
completely ignore Section 26 of the Act, while awarding interest
at 9% per annum on the belated payment of compensation.
10. The question as to when and in what circumstances, interest
could be awarded on belated payment of compensation, was
B considered by this Court in Union of India v. Parmal
Singh [(2009) 1 SCC 618] . This Court first referred to the general
principle and then the exceptions thereto, as under: (SCC pp. 624-
25, paras 12-13)
“12. When a property is acquired, and law provides for payment
C of compensation to be determined in the manner specified,
ordinarily compensation shall have to be paid at the time of taking
possession in pursuance of acquisition. By applying equitable
principles, the courts have always awarded interest on the delayed
payment of compensation in regard to acquisition of any property.
…
D
13. … The said general principle will not apply in two
circumstances. One is where a statute specifies or regulates the
interest. In that event, interest will be payable in terms of the
provisions of the statute. The second is where a statute or contract
dealing with the acquisition specifically bars or prohibits payment
E of interest on the compensation amount. In that event, interest
will not be awarded. Where the statute is silent about interest,
and there is no express bar about payment of interest, any delay
in paying the compensation or enhanced compensation for
acquisition would require award of interest at a reasonable rate
on equitable grounds.”
F
This Court, dealing with an acquisition under the Defence of India
Act, 1962 (which did not contain any provision either requiring or
prohibiting payment of interest), upheld the award of interest at
6% per annum.
G 11. Section 24 of the Act requires the Collector, after possession
of surplus land was taken over under Section 21(4) of the Act, to
cause public notice requiring persons interested to lodge their
claims. Section 25 of the Act provides for determination of
compensation and apportionment thereof. Section 26 deals with
mode of payment of amount of compensation and the same is
H extracted below:
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1161
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
“26. Mode of payment of amount of compensation.—(1) The A
amount of compensation may, subject to the provisions of sub-
section (3), be payable in transferable bonds carrying interest
at three per cent per annum.
(2) The bonds shall be—
(a) of the following denominations, namely— Rs. 50; Rs. 100; B
Rs. 200; Rs. 500; Rs. 1000; Rs. 5000 and Rs. 10,000; and
(b) of two classes—one being repayable during a period of twenty
yearsfrom the date of issue by equated annual instalment of
principal and interest, and the other being redeemable at par at
the end of a period of twenty years from the date of issue. It C
shall be at the option of the person receiving compensation to
choose payment in one or other class of bonds, or partly in one
class and partly in another.
(3) Where the amount of compensation or any part thereof, cannot
be paid in the aforesaid denomination, it may be paid in cash.” D
(emphasis supplied)
The said section contemplates the payment of compensation with
interest at 3% per annum in annual instalments spread over a
period of 20 years or at the end of 20 years. It also contemplates
E
payment being made either by transferable bonds or in cash. Sub-
section (3) of Section 26 enabling payment of compensation by
cash, in cases where it could not be paid by such bonds, does not
disturb the rate of interest, which is 3% per annum for 20 years,
provided in sub-section (1) thereof. We are therefore of the view
that whether the payment is made by transferable bonds or by F
cash, the rate of interest can be only at 3% per annum for a
period of 20 years from the date of taking possession.
12. The next question that requires consideration is about the rate
of interest if the payment is not made even after 20 years, and
whether it should be only at the rate of 3% per annum, even after G
20 years. Section 26 is silent about the rate of interest payable, if
the compensation is not paid within 20 years. We are therefore of
the view that Section 26 contemplates payment of the compensation
within 20 years from the date of taking possession with interest at
3% per annum; and for the period beyond 20 years, the said
H
1162 SUPREME COURT REPORTS [2022] 14 S.C.R.
A provision regarding interest will cease to apply and the general
equitable principles relating to interest will apply; and interest can
be awarded at any reasonable rate, in the discretion of the court.
Interest at the rate of 6% per annum, beyond 20 years would be
appropriate and payable on equitable principles.”
B (C) In Sandvik Asia Ltd.5, a bench of two Judges of this Court
was called upon to consider whether the inordinate delay of about 12 to
17 years in making a refund would entitle grant of interest. In the facts
of that case, interest at the rate of 9 per cent per annum from 31.03.1986
to 27.03.1998 was granted. Even while doing so this Court observed:
C “48. There cannot be any doubt that the award of interest on the
refunded amount is as per the statutory provisions of law as it
then stood and on the peculiar facts and circumstances of each
case. When a specific provision has been made under the statute,
such provision has to govern the field. Therefore, the court has to
take all relevant factors into consideration while awarding the
D rate of interest on the compensation.”
(D) In Gujarat Fluoro Chemicals 6, the correctness of the
decision in Sandvik Asia Ltd.5 came up for consideration before a bench
of three Judges of this Court, and the matter was considered thus:
E “3. In order to answer the aforesaid issue before us, we have
carefully gone through the judgment of this Court in Sandvik
case [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] and the order
of reference. We have also considered the submissions made by
the parties to the lis.
F 4. We would first throw light on the reasoning and the decision of
this Court on the core issue in Sandvik case [Sandvik Asia
Ltd. v. CIT, (2006) 2 SCC 508]. The only issue formulated by this
Court for its consideration and decision was whether an assessee
is entitled to be compensated by the Income Tax Department for
the delay in paying interest on the refunded amount admittedly
G due to the assessee. This Court in the facts of the said case had
noticed that there was delay of various periods, ranging from 12
to 17 years, in such payment by the Revenue. This Court had
further referred to the several decisions which were brought to
its notice and also referred to the relevant provisions of the Act
which provide for refunds to be made by the Revenue when a
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1163
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
superior forum directs refund of certain amounts to an assessee A
while disposing of an appeal, revision, etc. Since there was an
inordinate delay on the part of the Revenue in refunding the amount
due to the assessee this Court had thought it fit that the assessee
should be properly and adequately compensated and therefore in
para 51 of the judgment, the Court while compensating the
B
assessee had directed the Revenue to pay a compensation by
way of interest for two periods, namely, for Assessment Years
1977-1978, 1978-1979, 1981-1982, 1982-1983 in a sum of Rs
40,84,906 and interest @ 9% from 31-3-1986 to 27-3-1998 and in
default, to pay the penal interest @ 15% per annum for the
aforesaid period. C
5. In our considered view, the aforesaid judgment has been
misquoted and misinterpreted by the assessees and also by the
Revenue. They are of the view that in Sandvik case [Sandvik
Asia Ltd. v. CIT, (2006) 2 SCC 508] this Court had directed the
Revenue to pay interest on the statutory interest in case of delay D
in the payment. In other words, the interpretation placed is that
the Revenue is obliged to pay an interest on interest in the event
of its failure to refund the interest payable within the statutory
period.
6. As we have already noticed, in Sandvik case [Sandvik Asia E
Ltd. v. CIT, (2006) 2 SCC 508] this Court was considering the
issue whether an assessee who is made to wait for refund of
interest for decades be compensated for the great prejudice caused
to it due to the delay in its payment after the lapse of statutory
period. In the facts of that case, this Court had come to the
conclusion that there was an inordinate delay on the part of the F
Revenue in refunding certain amount which included the statutory
interest and therefore, directed the Revenue to pay compensation
for the same not an interest on interest.”
17. Since reliance was placed by the High Court on the decision
of the Constitution Bench of this Court in K.T. Plantation Pvt. Ltd. and G
Anr.4, we must note that what arose for consideration in that case, was
the constitutional validity of the Devika Rani Roerich Estate (Acquisition
& Transfer) Act, 1996, and Section 110 of the Karnataka Lands Reforms
Act, 1996 and certain notifications issued by the State Government. The
H
1164 SUPREME COURT REPORTS [2022] 14 S.C.R.
A questions which arose for consideration were set out in paragraph 25 of
the decision as under:-
“Whether the relevant provisions violated the basic structure of
the Constitution in so far as they conferred power on the executive
government for withdrawal of exception without hearing and
B without reasons and whether the provisions of the Acquisition
Act were protected by Article 31(A) of the Constitution and
whether they were violative of Article 300(A) of the Constitution?”
After dealing with these questions, the reference was answered
thus:
C We, therefore, answer the reference as follows:
(a) Section 110 of the Land Reforms Act and the Notification
dated 8-3-1994 are valid, and there is no excessive delegation of
legislative power on the State Government.
D (b) Non-laying of the Notification dated 8-3-1994 under Section
140 of the Land Reforms Act before the State Legislature is a
curable defect and it will not affect the validity of the notification
or action taken thereunder.
(c) The Acquisition Act is protected by Article 31-A of the
Constitution after having obtained the assent of the President and
E
hence immune from challenge under Article 14 or 19 of the
Constitution.
(d) There is no repugnancy between the provisions of the Land
Acquisition Act, 1894 and the Rocrich and Devika Rani Rocrich
Estate (Acquisition & Transfer) Act, 1996 (in short “the Acquisition
F
Act”), and hence no assent of the President is warranted under
Article 254(2) of the Constitution.
(e) Public purpose is a precondition for deprivation of a person
from his property under Article 300-A and the right to claim
compensation is also inbuilt in that article and when a person is
G deprived of his property the State has to justify both the grounds
which may depend on scheme of the statute, legislative policy,
object and purpose of the legislature and other related factors.
(f) Statute, depriving a person of his property is, therefore,
amenable to judicial review on grounds hereinbefore discussed.”
H
UNION OF INDIA & ORS. v. M/S. WILLOWOOD CHEMICALS 1165
PVT. LTD. & ANR. [UDAY UMESH LALIT, J.]
The aforestated answers and especially one at serial (e) show A
the context in which the issue of compensation was considered by this
Court, which is completely distinct and different from the issue with
which we are presently concerned.
18. Coming back to the present cases, the relevant provision has
prescribed rate of interest at 6 per cent where the case for refund is B
governed by the principal provision of Section 56 of the CGST Act. As
has been clarified by this Court in Modi Industries Ltd.9 and Godavari
Sugar Mills Ltd.7 wherever a statute specifies or regulates the interest,
the interest will be payable in terms of the provisions of the statute.
Wherever a statute, on the other hand, is silent about the rate of interest
and there is no express bar for payment of interest, any delay in paying C
the compensation or the amounts due, would attract award of interest at
a reasonable rate on equitable grounds. It is precisely for this reason
that paragraph 9 of the decision in Godavari Sugar Mills Ltd.7 accepted
the submission made by the learned counsel for the respondents and
confined the rate of interest to the prescription made in the statute. The D
award of interest at a rate in excess of what was prescribed by the
statute was only for a period beyond 20 years where the matter was not
strictly covered by the statute and as such it would be in the realm of
discretion of the Court. It must also be noted here that the inordinate
delay of up to 17 years in making refunds was a special circumstance
when this Court was persuaded to accept grant of interest at the rate of E
9 per cent per annum in Sandvik Asia Ltd.5 Even while doing so, the
observations made by this Court in Paragraph 48 of the decision are
quite clear that “the award of interest in refund and amount must be as
per the statutory provisions of law and whenever a specific provision
has been made under the statute such provision has to govern the field.” F
The subsequent decision of the bench of three Judges in Gujarat Fluoro
Chemicals6 noticed that the grant of interest at the rate of 9 per cent
was in the facts of the case in Sandvik Asia Ltd.5
19. Since the delay in the instant case was in the region of 94 to
290 days and not so inordinate as was the case in Sandvik Asia Ltd.5, G
the matter has to be seen purely in the light of the concerned statutory
provisions. In terms of the principal part of Section 56 of the CGST Act,
the interest would be awarded at the rate of 6 per cent. The award of
interest at 9 per cent would be attracted only if the matter was covered
by the proviso to the said Section 56. The High Court was in error in
awarding interest at the rate exceeding 6 per cent in the instant matters. H
1166 SUPREME COURT REPORTS [2022] 14 S.C.R.
A 20. We, therefore, allow these appeals and direct that the original
writ petitioners would be entitled to interest at the rate of 6 per cent per
annum on amounts that they were entitled by way of refund of tax.
Since the concerned amounts along with interest at the rate of 6 per
cent per annum have already been made over to them, nothing further
need be done in both the cases.
B
21. The instant Civil Appeals are thus allowed to the extent indicated
above without any order as to costs.
Ankit Gyan Appeals allowed.
(Assisted by : Preetam Bharti)
C
D
E
F
G
H
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