Held by Hon’ble Allahabad High court 

In the matter of SAVISTA GLOBAL SOLUTIONS PRIVATE LIMITED VERSUS UNION OF INDIA AND 5 OTHERS (Writ petition No. 113 of 2021)

The petitioner filed a manual refund application on 27.09.2019. The respondent processed the refund application and issued a final order on 06.01.2020 approving the refund amount. However, since the refund was not disbursed, therefore, the applicant filed a petition before the Hon’ble High Court seeking mandamus to issue refund amount and interest thereon @ 6% from the date of expiry of 60 days from date of filing of refund application.

The respondent contended that as per Circular No. 125/44/2019-GST dated 18.11.2019, the refund module for online filing of refund application has been deployed on GST portal with effect from 26.09.2019. Therefore, refund applications and further processing should be done through online mode only. Therefore, no interest is payable and a refund will be provided only after a refund claim is filed online.

Hon’ble HC held that Rule 97A provides that any reference to electronic filing of application includes manual filing. Circular can’t override or neglect the effect of Rule 97A.  It is a settled principle in law that the delegated legislation would stand on a higher pedestal over pure administrative instruction. Further, a circular was issued after the date of filing of refund application. Also, the respondent has processed the refund application and passed the order. Once the application had been processed and or order passed, which has attained finality, the respondents cannot escape the plain effect of the same. 

Therefore, the respondent is liable to pay a refund amount along with interest.

1. Brief facts of the case

1. M/s Savista Global Solutions Private Limited (“The Petitioner”) was having a refund pertaining to the month of July, 2019 of INR 1,28,50,535/-.
2. The petitioner filed an application seeking refund on 27.09.2019. In pursuance of Rule 97A of CGST Rules, 2017, application for seeking refund was filed manually.
3. The respondent passed an order of granting refund on 06.01.2020. The order was not passed within a period of 60 days from the date of filing of refund application in accordance with Section 54(7) of CGST Act, 2017.
4. Therefore, the petitioner also requested for interest @ 6%p.a. From the date of expiry of 60 days from the date of filing of refund application till the date of actual payment of refund in accordance with Section 56 of CGST Act, 2017.
5. Till the date of filing the petition, neither amount of refund awarded under the contract nor any interest has been paid to the petitioner. Therefore, the petitioner filed a petition before Hon’ble Allahabad High Court seeking mandamus*.

*Mandamus writ is an order from a court to an inferior government official ordering the government official to properly fulfill their official duties or correct an abuse of discretion. 

2. Relevant Legal Extracts

Relevant extract of the statute is reproduced below for ready reference:

1. Section 56 of CGST Act 2017: 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 an application under sub-section (1) of that section, interest at such rate not exceeding six percent. 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 an application under the said sub-section till the date of refund of such tax:

…”

2. Rule 97A of the CGST rules 2017:Manual filing and processing

“97A-Notwithstanding anything contained in this Chapter, in respect of any process or procedure prescribed herein, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to these rules.”

3. Circular No. CBEC-20/16/04/18-GST dated 18th November, 2019 issued a fully electronic refund process through FORM GST RFD-01 and single disbursement.. Relevant extract of Para 2 of circular is reproduced below:

“The necessary capabilities for making the refund procedure fully electronic, in which all steps of submission and processing shall be undertaken electronically, have been deployed on the common portal with effect from 26.09.2019. Accordingly, the Circulars issued earlier laying down the guidelines for manual submission and processing of refund claims need to be suitably modified and a fresh set of guidelines needs to be issued for electronic submission and processing of refund claims….”

3. Submission of the Petitioner

The petitioner filed a petition contenting following points:

1. Amount as approved under order passed on 06.01.2020 is refundable to the petitioner for the month of July, 2019.
2. As per plain language of the statute, the interest is also payable to the Petitioner @6% from 27.11.2019  (i.e., 60 days from date of filing of refund application) onwards.

4. Contention of the Respondent

In the exchange of pleadings the Respondent contended the following:

1. It has approved refund on 06.01.2020 and forward filed for actual payment on 15.01.2020. Therefore, no liability arises for payment for interest.
2. Further, another respondent contended that application for filing refund application and the above mentioned forwarding letter by another respondent was moved through physical mode after 26.09.2019.
3. As per circular No. CBEC-20/16/04/18-GST dated 18.11.2019, such refund application and forwarding letter could not be processed.
4. After activation of refund module on GST portal on 26.09.2019, the refund application and further processing should have been made through online mode only and such deficiency was intimated to another respondent earlier also.
5. Therefore, no interest is due to the petitioner and also the refund will be paid only after the petitioner and the respondent will lodge the particulars of the refund and the refund order on the GST portal, through online mode, only.

5. Analysis and findings of Hon’ble Allahabad High Court

1. In the given case, the application filed by petitioner on 17-9-2019 to the respondent for its refund due from July 2019.
2. According to Rule 54(7) of the CGST Rules 2017, the said application should have been processed and order passed within 60 days, but in the given case the 60 days have been passed and no order passed by respondent.
3. Since, the order has not been passed by the respondent within stipulated time, by virtue of section 56 of CGST Act 2017, interest at the rate of 6% is levied from the date of expiry of 60 days till the payment of refund is done.
4. Further, manual filing of refund applications do not bring any disentitlement either toward payment of refund amount or toward payment of interest thereon. Contention of respondent of online filing of refund application and refund order be uploaded on GST portal is an eye wash.
5. GST law provides that application for refund, refund order and disbursement of refund should be made through online mode. However, considering the problems that arose after the introduction of the GST regime, Rule 97A was also introduced which provides that any reference to electronic filing of an application includes manual filing of such application.
6. Further, Circular No.125/44/2019-GST prescribed the online mode of filing refund application w.e.f. 26-09-2019. Such a circular is of no benefit since a circular could not override or negate the effect of law arising from Rule 97A of the Rules. 
7. It is an established principle in law that delegated legislation would stand on a higher pedestal over a pure administrative instruction. Therefore in the given case:
   • The circular may provide an optional mode to process the refund claim but cannot take away the effect of rule 97A of CGST Rules.
   • Further, The refund application was filed on 27.09.2019, which is prior to the date of issuance of circular, i.e., 18.11.2019. 
   • More importantly, the respondent has himself processed the application and passed an order on 06-10-2020 directing refund.
8. Once the application had been processed and or order passed, which has attained finality, the respondents cannot escape the plain effect of the same. They also cannot escape the liability of interest that arises on noncompliance of the same.
9. At last the respondent has not complied with the law as he has insisted and as per the discussion above he cannot escape from the liability of refund of  amount ₹1,28,50,535/- and the interest on it @ 6% till the date of issue of demand draft.
10. Accordingly, writ petition is allowed.

6. Conclusion

1. Once the application had been processed and or order passed, which has attained finality, the respondents cannot escape the plain effect of the same. They also cannot escape the liability of interest that arises on non-compliance of the same.