Textile Mill’s Full ₹1.18 Crore GST Payment Doesn’t Bar Delayed-Refund Interest, Even Though Paid Through Credit Ledger: Tribunal

The taxpayer paid an additional tax demand of ₹1,18,26,516 through its Electronic Credit Ledger under an order made under Section 73 of the CGST/SGST Act, 2017.

The First Appellate Authority subsequently set aside that demand.

The taxpayer sought a refund or re-credit of the amount, which was sanctioned without interest.

Its appeal against the denial of interest was dismissed by the First Appellate Authority, leading to this second appeal.

The Tribunal’s account contains differing dates for the refund application and sanction; it records that the Department accepted that delay occurred due to workload.

Section 56 of the CGST/SGST Act provides for interest on refunds not made within sixty days of receipt of the refund application; its proviso addresses refunds arising from orders that have attained finality and provides for interest at the applicable notified rate.

Sections 107(6) and 107(7) prescribe the pre-deposit for an appeal and provide for a stay of recovery of the balance disputed amount; the pre-deposit is not a ceiling on what an appellant may pay, nor does payment beyond it by itself waive a right to a refund or statutory interest.

The Tribunal also considered Sections 49 and 50 in relation to ledger payments and tax liabilities.

The Tribunal treated the Department’s admission of delay as bringing the refund claim within Section 56, subject to the applicable statutory requirements.

It reasoned that credit debited to discharge the disputed demand was unavailable for the taxpayer’s use until restored; therefore, the choice of the Electronic Credit Ledger rather than the Electronic Cash Ledger was not, by itself, a basis to deny interest.

It further held that the statutory pre-deposit is the minimum required to pursue an appeal, not a cap on payment.

Since the Act did not make payment of the full demand a waiver of refund or interest rights, the taxpayer’s payment of the entire demand did not extinguish any interest entitlement otherwise available under the Act.

It held that neither payment of the entire disputed demand nor payment through the Electronic Credit Ledger, followed by re-credit through FORM GST PMT-03, was by itself sufficient to defeat a claim to statutory interest.

The taxpayer was directed to submit the order and an interest calculation to the proper officer, who was directed to examine it within three weeks and disburse any interest payable to the taxpayer’s bank account.