Matrix Cellular (International) Services Pvt Ltd v. The Principal Commissioner State Tax Delhi & Anr

judgement is extracted below: "31. It is important to note that the rate of interest as specified in the main provision of Section 56 of the CGST Act and the proviso to Section 56 of the CGST Act is materially different. Whereas, the main provision of Section 56 of the CGST Act provides for an interest at the rate not exceeding 6% per annum, the proviso to Section 56 of the CGST Act stipulates interest at the rate not exceeding 9% per annum.

¶32The learned counsel also informed this Court that the interest at the rate of 6% per annum and 9% per annum has been notified for the purposes of Section 56 of the CGST Act and the proviso to the said section, respectively. Thus, there are two separate rates of interest specified under Section 56 of the CGST Act. The interest at the rate of 6% is payable for the period commencing from a date immediately after expiry of sixty days from the date of an application under Section 54(1) of the CGST Act, however, this rate is enhanced for the period covered under the proviso to Section 56 of the CGST Act. The proviso to Section 56 of the CGST Act expressly provides that an interest at the rate of 9% per annum would be payable from the date immediately after the expiry of sixty days from the receipt of an application, which is filed as a consequent to an order passed by the Appellate Authority, Adjudicating Authority, Appellate Tribunal or a court that has attained finality. This clearly indicates that if a person's claim for refund is a subject matter of further proceedings, which finally culminate in orders upholding the applicant's entitlement, and yet the payment is not made within a period of sixty days from an application filed pursuant to such orders, the person is required to be compensated at a higher rate of interest, of 9% per annum. This higher rate of interest would run from the date immediately after the expiry of sixty days of the filing of such an application – that is, the application filed pursuant to the orders of the appellate fora and not the first application.

¶33It is clear from a plain reading of Section 56 of the CGST Act that whereas the main provision of Section 56 of the CGST Act refers to the rate of interest applicable on the amount of refund due, which remains unpaid even after sixty days from the date of application for refund; the proviso provides for an increased rate of interest for the period that commences from the date immediately after the expiry of sixty days from the date of application which is filed pursuant to the claim for refund attaining finality in appellate proceedings. Section 56 of the CGST Act, thus, works as follows. The applicant claiming a refund is entitled to interest at the rate of 6% per annum from a date

immediately after the expiry of sixty days from making an application under Section 54(1) of the CGST Act. However, if a person's claim is denied (or if granted is not accepted by the Revenue) and the order of the Adjudicating Authority is carried in appeal to the Appellate Authority or to the Appellate Tribunal/High Court, which finally upholds the claim, the applicant may have to file a second application to secure the refund. If such application for refund filed by the person consequent to succeeding before the Appellate Authority, Appellate Tribunal or court, is not processed within a period of sixty days of filing the application, the applicant would be entitled to a higher rate of 9% per annum commencing from the date immediately after the expiry of sixty days of his application filed pursuant to the appellate orders. However, this does not mean that the rate of 6% per annum is not payable for the period commencing from the date immediately after expiry of sixty days from his first application till sixty days after filing of his second application pursuant to the appellate orders. In another words, the proviso merely enhances the interest payable to a person for the period commencing from the date immediately after sixty days from the date of his application filed pursuant to its entitlement to refund claim attaining finality."

¶14The efficacy of the said scheme is contingent upon the Department adhering to the specific timelines prescribed under the Act and the Rules, which, in the present case, have evidently not been complied with. For whatever reason, the refund or acknowledgment has not taken place till date and the Department has continued to retain the amount.

¶15However, even as per the counter affidavit, it is clear that the amount can no longer be retained by the Department. Therefore, in the opinion of this Court, the amount would be liable to be refunded and cannot be enjoyed by the Department in this manner.

¶16Thus, the Petitioner is entitled to the refund. The only remaining question would be of interest. Even if a 60 days period is counted from the date of refund application, the Petitioner would be entitled to interest for a substantial period of time. The refund application being dated 12th April, 2018, 60 days from there would take the Petitioner to 11th June, 2018.

¶17Accordingly, it is directed that the Department shall immediately by 30th May, 2025 credit the Petitioner's bank account with the sum of Rs.3,39,79,974/- along with interest @ 6% for the following periods: a. 11th June, 2018 till 2nd March 2020; b. 29th August 2023 till today i.e., 20th May, 2025. For the intervening period from issuance of deficiency memo till the first letter post the pandemic i.e., 3rd March 2020 to 28th August 2023, no interest would be payable, especially because of the filing of the withdrawal of the refund application by the Petitioner.

¶18However it is made clear that if the Department does not credit with the said amount to the bank account of the Petitioner, interest would be liable to be paid @ 18% per annum from 1st June 2025.

¶19The petition, along with all pending applications, is disposed of in the above terms.

PRATHIBA M. SINGH JUDGE

RAJNEESH KUMAR GUPTA JUDGE MAY 20, 2025/dk/Ar.

* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 20th May, 2025 + W.P.(C) 5088/2024 & CM APPL. 30873/2025 MATRIX CELLULAR (INTERNATIONAL) SERVICES PVT LTD. .....Petitioner Through: Mr Anurag Soan, Mr Akshay Saxena, Mr Rituraj, Advs. (M:7709512446) versus THE PRINCIPAL COMMISSIONER STATE TAX DELHI & ANR. .....Respondents Through: Mr. K.G. Gopalakrishnan, Ms. Nisha Mohandas and Mr. Kunwar Raj Singh, Advs. CORAM: JUSTICE PRATHIBA M. SINGH JUSTICE RAJNEESH KUMAR GUPTA Prathiba M. Singh, J. (Oral) 1. This hearing has been done through hybrid mode. 2. The present petition under Article 226 of the Constitution of India seeks directions against the Respondents for grant of refund of Rs. 3,39,79,974/- along with applicable interest in relation to the refund application dated 12th April, 2018 bearing ARN:770704180207738 3. The brief background of the case is that the Petitioner obtained the GST registration as Input Service Distributor (hereinafter 'ISD') on 10th July, 2017. According to the Petitioner, it had inadvertently deposited a sum of Rs.3,39,79,974/- in its Electronic Cash Ledger (hereinafter 'ECL') between August, 2017 to January, 2018. The Petitioner was under the mistaken impression that only Input Tax Credit (hereinafter 'ITC') could be distributed through the ISD account and the cash deposit was not permissible for distribution. In view thereof, owing to the inadvertent deposit, the Petitioner filed a refund application on 12th April, 2018 seeking refund of the said amount. The Respondent - Delhi GST Department (hereinafter 'the Department') debited the amount from ECL and the same was to be credited into the Petitioner's bank account. However, unfortunately the anticipated credit did not take place. 4. A deficiency memo was issued to the Petitioner on 3rd March, 2020. In order to rectify the deficiency, and upon the Department clarifying the Petitioner's earlier misunderstanding, the Petitioner submitted a withdrawal application seeking to withdraw the original refund application, under the bona fide belief that the refund amount would thereafter be credited. However, as the amount continued to remain uncredited, the Petitioner addressed repeated representations to the Authorities, but to no avail. Despite repeated follow ups, the amount was not credited, hence this writ petition. The prayer in this writ petition is as under: "(i) issue a Writ of Mandamus or any other appropriate writ, order or direction in the nature of mandamus under Article 226 of the Constitution of India to direct the Respondents to grant refund of Rs.3,39,79,974/- as filed under Refund Application dated 12.04.2018 bearing ARN AA0704180207738 to the Petitioner; (ii) issue a Writ of Mandamus or any other appropriate writ, order or direction in the nature of mandamus under Article 226 of the Constitution of India to direct the Respondents to grant interest on Rs.3,39,79,974/-, as filed under Refund Application dated 12.04.2018 bearing ARN AA0704180207738, from 11.06.2018 till the date of actual refund to the Petitioner;" 5. Notice was issued in this writ petition on 8th April, 2024. A counter affidavit was directed to be filed. and the same was filed by the Department in July, 2024. The stand in the counter affidavit is that in terms of Circular No.17/17/2017 dated 15th November, 2017, the refund application along with all the requisite documents ought to be submitted physically to the jurisdictional authority. The sanction order for refund is to be issued only after receipt of the refund application, which is complete in all respects. 6. It is, in fact, not disputed that when a deficiency memo RFD-03 is issued, the refund is to be processed within 60 days from the receipt of reply to the deficiency memo. However, it is the Department's position that since the refund application was not submitted in a physical manner, the same could not be processed within the stipulated time. In this case the deficiency memo was issued on 19th February, 202