Order Date – 30 April 2024

Parties: M/s.Razack Trading Company Vs The Assistant Commissioner (ST) (FAC), The Appellate Deputy Commissioner (ST), Goods and Service Tax

Facts –

• The Petitioner, M/s.Razack Trading Company, availed Input Tax Credit (ITC) on the basic customs duty paid by the petitioner under the provisions of CENVAT Credit Rules, 2004, which was by filing TRAN-1 under Section 142 of the CGST Act. They claimed refund of the amount which was lying unutilised and sanctioned on 17.07.2018 in Form RFD-06.
• Department issued notice directing the appellant to pay the refund along with interest and penalty. The petitioner repaid the amount and on appeal, the second respondent has dropped the penalty imposed on the petitioner under Section 74 of the CGST Act, 2017 but has uphold the levy of interest under Section 50 of the CGST Act, 2017.

Issue –

• Whether interest under section 50 can be levied on erroneous refund of input tax credit?

Order –

• The Single Bench of Hon’ble High Court observed that the petitioner was not entitled to avail input tax credit on the Basic Customs Duty paid under the Customs Act, 1962, under the provisions of the CENVAT Credit Rules, 2004. Under Section 140 of the CGST Act, 2017, only input tax credit lying un-utilised under the CENVAT Credit Rules, 2004 and TNVAT Act, 2006 in Tamil Nadu could be transitioned.
• Therefore, the question of the petitioner transitioning the amount that was wrongly claimed as input tax credit under the CENVAT Credit Rules, 2004 did not arise. The Department however committed a mistake by sanctioning the refund to the petitioner on 17.07.2018 pursuant to refund claim filed by the petitioner.
• Power to recover the amount under Section 73 or Section 74 of the respective GST Enactments implies the power to impose both penalty and interest. Therefore, it cannot be argued that interest under Section 50(3) of the CGST Act, 2017 cannot be imposed on the petitioner. In fact, both Section 73(1) and 74 of the respective GST enactments contemplates interest on account of erroneous refund of amount.
• There has to be restitution of the unjust benefit gained by a dealer/person. These provisions have been framed to ensure that there is proper restitution. Thus, no case is made out to interfere with the impugned order. Therefore, the impugned order is sustainable and this Writ Petition is liable to be dismissed.