ANAS ENTERPRISE vs UNION OF INDIA
- Court
- Gujarat High Court
C/SCA/11064/2025 JUDGMENT DATED: 16/07/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11064 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-
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Approved for Reporting Yes No
✔
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ANAS ENTERPRISE
Versus
UNION OF INDIA & ANR.
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Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1
DEEPAK N KHANCHANDANI(7781) for the Respondent(s) No. 2
MR PRADIP D BHATE(1523) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 16/07/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. Since a short issue is involved in the
matter, the same is taken up for final disposal.
2. The present petition is filed for quashing
and setting aside the order dated 17.06.2025,
passed in FORM-GST-RFD-06 by the respondent No.2,
rejecting the refund claim of the excess payment
of interest.
3. Learned advocate Mr.Uchit Sheth, appearing
for the petitioner has submitted that despite the
petitioner having pointed out the judgement of
this Court rendered in the case of Arya Cotton
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Industries and Anr. vs. Union of India and anr.,
(2024) 130 GSTR 81, respondent No.2 has passed
the impugned order. It is submitted that
subsequently, in view of the judgement passed by
this Court, a Proviso to Rule 88B of the Central
Goods and Services Tax Rules, 2017 (for short
“CGST Rules”) has been introduced, which also
finds to be in favour of the petitioner however,
the respondents have refused to apply the same
retrospectively.
4. The petitioner, who is engaged in the
business of manufacturing and sale of chewing
tobacco, filed belated returns for the months of
July-September 2017, June 2020 and March-June
2021. All the amount of tax as per such returns
were deposited in the Electronic Cash Ledger
before the due date for filing returns for all
the months, barring the month of April, 2021. It
appears that there was some audit objection
raised with regard to the interest computed and
paid on 01.06.2023 by filing FORM GST DRC-03. The
audit report issued on 23.06.2023 mentions about
the levy of interest and thereafter, an advisory
was issued to the petitioner asking to pay
interest because of belated filing of returns.
Subsequently, a notice was issued on 17.01.2025,
demanding interest on the basis of belated filing
of returns. It was responded by the petitioner
vide the letter dated 04.04.2025. The petitioner
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also pointed out the decision of this court in
the case of Arya Cotton Industries and Anr.
(supra). Thereafter, formal refund application
dated 19.04.2025 was filed on online GST portal
along with calculation of refund.
5. A deficiency memo was issued with reference
to such refund application. Accordingly, the
petitioner immediately refiled the refund
application on 27.04.2025 however, a notice was
issued on 10.06.2025 to the petitioner proposing
to reject the refund application on the ground
that the amendment made in Rule 88B of the CGST
Rules is prospective in nature and hence, the
refund application of the petitioner for the
period prior to amendment deserves to be
rejected. The petitioner again responded on
16.06.2025, pointing out the order of this Court
and reiterating his request however, the
respondent No.2 passed the order dated
17.06.2025, rejecting the refund application by
holding that amendment to Rule 88B of the CGST
Rules is prospective in nature. The same is
impugned in the present writ petition.
6. Learned advocate Mr.Uchit Sheth, while
rd
pointing out the Minutes of 53 meeting of the
GST Council, held on 22.06.2024, has submitted
that the amendment to Rule 88B of the CGST Rules
by introducing the Proviso thereunder was, in
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fact, made pursuant to the decision of this Court
in the case of Arya Cotton Industries and anr.
(supra). Thus, it is urged that the impugned
order is required to be quashed and set aside.
7. Opposing the present writ petition and the
foregoing submissions, learned Senior Standing
Counsel Mr.Khanchandani, at the outset has
submitted that the petitioner has an alternative
remedy of filing an appeal under section 107 of
the Central Goods and Services Tax Act, 2017 (for
short “CGST Act”) before the Additional Joint
Commissioner (Appeals) and hence, the petition
may not be entertained. Further, it is submitted
that the Proviso, which was introduced with
effect from 10.07.2024 under Rule 88B of the CGST
Rules will apply prospectively and hence, the
impugned order may not be interfered with.
8. We have heard the learned advocates appearing
for the respective parties.
9. It is pertinent to note that the respondent
authority has denied the grant of refund of
excess amount of interest by rejecting the
application of the petitioner only for the reason
that the Proviso to Rule 88B of the CGST Rules
only applies prospectively, by ignoring the
judgement of this Court rendered in the case of
Arya Cotton Industries and anr. (supra). The
petitioner repeatedly pointed out the said
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decision in his replies however, the respondents
have not acceded to the request and examined the
case of the petitioner in light of the said
judgement. The relevant paragraphs of the
judgement rendered by the Coordinate Bench of
this Court in the case of Arya Cotton Industries
and anr. (supra) are as under:
“12. As per the above explanation, the date of credit
to the account of the Government in the authorised
bank shall be deemed to be the date of deposit in
electronic cash ledger. Therefore, when the return is
filed by the assessee in Form GSTR-3B and if there is
sufficient balance available in the electronic cash
ledger, than liability as per the return is simply
offset against such balance by debit in electronic
cash ledger. Hence, the tax paid at the time of
deposit into electronic cash ledger which is adjusted
against liability at the time of filing of return is
merely setting off of the amount from electronic cash
ledger to be utilised for payment of tax liability as
per the return filed. Therefore, the amount in the
electronic cash ledger is nothing but in nature of
advance tax lying in the account of the assessee
which cannot be withdrawn or utilised in any manner
by the assessee except for payment of tax liability
as per the return filed.
13. Section 50 of CGST Act provides for interest on
delayed payment of tax. Proviso to Section 50(1)
refers to interest on tax payable in respect of
supplies made during a tax period and declaring the
return for the said period furnished after the due
date in accordance with the provisions of Section 39
shall be payable on the portion of the tax which is
paid by debit in electric cash ledger. It appears
that the respondents have literally interpreted the
words “interest shall be payable on that portion of
the tax which is paid by debit in the electronic cash
ledger”. The debit in electronic cash ledger is on
the date of filing of the return and therefore,
interest is calculated till date of filing of return
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ignoring the fact that the assessee might have
deposited the amount in electronic cash ledger prior
to the date of filing of belatedly return for and
various return may reasons. Be filed Debiting of
electronic cash ledger is only adjustment of the
amount of deposit made in the electronic cash ledger.
Therefore, on plain reading of the provisions of
Section 50(1) which applies for calculating levy of
interest on delayed payment of tax cannot be
literally interpreted to the effect that interest is
payable on the amount which is already deposited and
utilised for the payment and thereafter adjusted for
payment of tax is contrary to the fundamental
principle for charging interest which is compensatory
in nature. If the mechanical and literal
interpretation is done by the respondent is accepted,
the same would convert the interest into the nature
of penalty. It appears that for the purpose of
introduction of the proviso to Section 50(1), is with
regard to remove the controversy which earlier
existed as to whether interest is leviable on gross
tax liability without considering admissible input
tax credit or whether it was only applicable on net
tax liability paid by the taxable person. The GST
Counsel in his 31st meeting decided to incorporate
proviso to Section 50 of the Act so as to clarify
that interest was leviable only liability and
accordingly, the on net tax proviso was introduced
prospectively by Finance Act, 2019 and notified vide
notification No.63/2020 dated 25.08.2020 and
th
thereafter, in the 39 meeting of the GST Counsel, it
was decided to apply the proviso with effect from
01.07.2017 by Finance Act, 2021. The retrospective of
the provisio was notified by notification No.16 of
2021 dated June 1, 2021.
14. Therefore the purpose of introduction of the
proviso to Section 50 was only to clarify with regard
to levibility of the interest on net tax liability
liability of the and not assessee. On gross tax The
proviso has therefore nothing to do with the period
for which the interest is to be levied.
15. Therefore, the interest can be levied only from
the due date of payment of tax till the deposit of
such tax in the electronic cash ledger on demand of
interest even for subsequent period from the date of
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deposit in electronic cash ledger till date of filing
of return is therefore not tenable.”
10. We may assert that the respondents have not
denied that the case of the petitioner is
squarely covered by the aforesaid observations of
this Court. It appears that pursuant to the
decision rendered by this Court on 14.06.2024,
rd
the 53 meeting of GST Council, held on
22.06.2024, introduced the Proviso to Rule 88B of
the CGST Rules in line of the judgement of this
Court, which was inserted vide Notification
No.12/2024 dated 10.07.2024, with effect from
10.07.2024.
11. The Proviso to Rule 88B of the CGST Rules
reads as under:
“Provided that where any amount has been credited in
the Electronic Cash Ledger as per provisions of sub-
section (1) of section 49 on or before the due date
of filing the said return, but is debited from the
said ledger for payment of tax while filing the said
return after the due date, the said amount shall not
be taken into consideration while calculating such
interest if the said amount is lying in the said
ledger from the due date till the date of its debit
at the time of filing return.”
12. Thus, the respondent, though have not denied
that the case of the petitioner is governed by
the decision of this Court, but curiously,
refused to apply the ratio laid down by this
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Court by contending that the Proviso to Rule 88B
of the CGST Rules applies prospectively.
13. This is a classic case of selective denial.
On one hand, they acknowledge that the ratio of
the decision in case of Arya Cotton Industries
and anr. (supra), applies to the claim of
interest, but, simultaneously, they deny by
taking shelter under the self-determined
prospective effect of Rule 88B of the CGST Rules.
The respondents were supposed to process the
application filed by the petitioner for refund in
light of the aforesaid judgement, but instead,
they chose an alternative route to reject the
application by applying the analogy that the
Proviso to Rule 88B of the CGST Rules would apply
prospectively.
14. Thus, the impugned order rejecting the
application of the petitioner is not only
arbitrary, but suffers from total non-application
of mind to the decision rendered by this Court
despite having been pointed out by the petitioner
repeatedly.
15. Hence, we are inclined to accept the writ
petition. The impugned order dated 17.06.2025 is
hereby quashed and set aside. The recovery notice
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dated 17.01.2025 is also quashed and set aside.
We direct the respondents to grant refund of
excess amount of interest in terms of the refund
application filed by the petitioner along with
statutory interest of 6% per annum. The necessary
order processing the refund application shall be
passed within a period of six weeks, failing
which such amount would carry a further interest
of 12% per annum. for each week of delay. We also
impose a cost of Rs.5,000/- on the respondent,
which shall be deposited before the registry of
this Court within a period of one week from the
date of receipt of this order.
Sd/-
(A. S. SUPEHIA, J)
Sd/-
(VAIBHAVI D. NANAVATI,J)
NVMEWADA/93
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