Case Note & Summary
The petitioner, Ms. Anita Agarwal, sole proprietor of M/s. Shanker International, is an exporter of goods such as Ethyl Alcohol Liquid Packaging Film and Iodized salt. During the period August 2018 to July 2019, she filed various shipping bills, which are considered refund applications under Section 16(3) of the IGST Act read with Section 54 of the CGST Act and Rule 96 of the CGST Rules, claiming a refund of IGST of Rs. 3.21 crore. The refund was granted only in August 2020 after constant follow-up. The petitioner was informed that her name was flagged on the 'risky exporters list', causing the delay. The red flag was removed on 3 August 2020 after receipt of NOC from the Risk Management Centre for Customs, and the refund was granted thereafter. The petitioner filed a writ petition under Article 226 of the Constitution seeking interest on the delayed refund under Section 56 of the CGST Act. The respondents argued that there was no delay as the refund was granted immediately after the red flag was removed. The court framed the issue of whether the petitioner is entitled to interest under Section 56 for the period from the expiry of 60 days from the filing of the shipping bill until the date of refund, despite the red flagging. The court analyzed Section 56, which mandates interest if refund is not made within 60 days from the date of receipt of application. The court noted that as per Circular dated 17 June 2019, verification in red-flagged cases must be completed within 30 days, and Circular No.131/1/2020 dated 23 January 2020 requires verification within 14 working days. The court held that the red flagging does not justify indefinite delay and the respondents are bound to complete verification within the prescribed time. The court directed the respondents to pay interest under Section 56 for the period from the expiry of 60 days from the date of filing the shipping bill until the date of refund, after excluding 30 days for verification as per the Circular dated 17 June 2019. The petition was allowed in part.
Headnote
A) Goods and Services Tax - Interest on Delayed Refund - Section 56 of the Central Goods and Services Tax Act, 2017 - Red Flagging of Exporter - The petitioner, an exporter, claimed refund of IGST on exports. The refund was delayed due to the petitioner's name being red-flagged on the respondents' portal. The court held that the red flagging does not justify indefinite delay and the respondents are bound to complete verification within the time prescribed under Circulars. The petitioner is entitled to interest under Section 56 for the period beyond 60 days from the date of filing the shipping bill until the date of refund, excluding the period of 30 days for verification as per Circular dated 17 June 2019. (Paras 8-14) B) Goods and Services Tax - Time Limit for Verification - Circular dated 17 June 2019 and Circular No.131/1/2020 dated 23 January 2020 - The court noted that as per Circular dated 17 June 2019, verification of red-flagged cases must be completed within 30 days. The respondents failed to complete verification within that period. The court directed that interest be paid for the period of delay beyond 60 days from the date of application, after excluding 30 days for verification. (Paras 10-14)
Issue of Consideration
Whether the Petitioner is entitled to interest under Section 56 of the CGST Act for the period starting from the expiry of 60 days from the date of filing the shipping bill up to the date of grant of refund, although during the interregnum, the Petitioner’s name was red flagged on the respondents' portal.
Final Decision
The petition is partly allowed. The respondents are directed to pay interest under Section 56 of the CGST Act for the period from the expiry of 60 days from the date of filing the shipping bill until the date of refund, after excluding 30 days for verification as per Circular dated 17 June 2019. Rule is made absolute in those terms.
Law Points
- Interest on delayed refund
- Section 56 CGST Act
- Red flagging of exporter
- Time limit for verification
- Circular dated 17 June 2019
- Circular No.131/1/2020 dated 23 January 2020
