Order Date – 05 December 2023

Parties: Grapes Digital Pvt Ltd Vs Principal Commissioner & Anr.

Facts –

• The Petitioner, Grapes Digital Pvt Ltd, claimed refund of IGST paid in respect of zero rated supplies made during the period of July, 2017 till March, 2018 as the activity of import and export of services is tax neutral and it has no real liability to pay any tax.
• Further, the petitioner is liable to pay tax on import of services on RCM, it is entitled to claim refund of the same, either directly, or by availing the Input Tax Credit (ITC) to pay IGST on its output supplies and claim refund of the IGST.
• The same was allowed by the Adjudicating Authority, however had adjusted an amount on account of interest on delayed payment of tax on input supplies on Reverse Charge Method as interest on delayed payment of IGST on zero rated supplies.

Issue –

• Whether the Adjudicating Authority was correct in adjusting the interest liability?

Order –

• The Divisional Bench of Hon’ble High Court observed that the adjudicating officer has adjudicated the interest payable and there is no dispute as to the material facts on the basis of which said interest is calculated. In these circumstances, the principles of natural justice are satisfied and there was no requirement for the Adjudicating Authority to issue any further notice. The petitioner has also availed of remedy of an appeal under Section 107 of the CGST Act.
• Hence there are no infirmity with the process of adjusting interest as payable on the admitted tax against the amount refundable to a tax payer.
• The interest liability on delayed payment of IGST is the statutory consequence of the assessee’s claim that the exports made by it were on payment of IGST. There is no dispute that the IGST on the exports during the months of July, 2017 to March, 2018 was liable to be paid on various dates in August, 2017 to April, 2018 as mentioned in the tabular statement as set out by the Adjudicating Authority in the Order-in[1]Original dated 24.10.2018.
• It is evident that the petitioner has been mulcted with the huge interest liability on delayed payment of IGST, which in one sense is unwarranted, however, that is the consequence of the course adopted by the petitioner.
• If the refund of IGST on exports was rejected on the ground that petitioner could not amend the invoices, it would follow that its claim would be required to be considered for the ITC utilised to pay such IGST. It is difficult to accept the Revenue’s contention that the petitioner had forfeited its right to claim refund on account of an attempt to amend its option as available under Section 16(3) of the IGST Act, as in force at the material time.
• Thus it was directed to disburse the refund sanctioned by the Adjudicating Authority. It was held that the petitioner’s claim that the adjustment of interest is illegal is rejected and The impugned Order-in- Appeal dated 14.10.2020, to the extent it denies the petitioner’s claim for refund in entirety is set aside.