UNION OF INDIA & ORS versus M/S. WILLOWOOD CHEMICALS PVT. LTD. & ANR. on 19 April 2022

1. Delay condoned. Leave granted.

2. Appeal arising out of Special Leave Petition (C) Diary No.27099of 2020 is directed against the judgment and order dated 10.07.2019passed by the High Court[1] in Special Civil Application No.18591 of 2018and against the order dated 13.03.2020 passed in Review Petition arisingtherefrom being Misc. Civil Application No.1 of 2019. (For facility,hereinafter referred to as, “the first case”)

Appeal arising out of Special Leave Petition (C) Diary No.28455of 2020 is directed against the judgment and order dated 10.07.2019passed by the High Court[1] in Special Civil Application No.15925 of 2018and against the order dated 13.03.2020 passed in Review Petition arisingtherefrom being Misc. Civil Application No.1 of 2019. (For facility,hereinafter referred to as, “the second case”)

3. The second case arises out of a Writ Petition, being SpecialCivil Application No.15925 of 2018 filed by M/s. Saraf Natural Stonesubmitting inter alia that:

“2.5The Petitioner states that in terms of Section 16 of the IGSTAct[2], 2017, a registered person making exports of goodsoutside India, shall be eligible to claim, refund of eitherunutilized input tax credit on export of goods under bond orletter of undertaking or refund of Integrated tax paid onexport of goods.

2.6The Petitioner further states that Section 16(3) of the IGSTAct, provides that refund should be claimed in accordancewith the provisions of Section 54 of the CGST Act[3] or therules made thereunder. Section 20 of the IGST Act furtherprovides that provisions of CGST Act relating to refundsshall, mutatis mutandis, apply, so far as may be, in relation 1 High Court of Gujarat at Ahmedabad.

2 The Integrated Goods and Services Tax Act, 2017

3 The Central Goods and Services Tax Act, 2017

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Ato Integrated tax as they apply in relation to central tax as ifthey are enacted under this Act.

2.7. The Petitioners further states that Rule 2 of the IntegratedGoods and Services Tax Rules, 2017 provides that theCentral Goods and Services Tax Rules, 2017, for carryingBout the provisions specified in Section 20 of the IntegratedGoods and Services Tax Act, 2017 shall, so far as may be,apply in relation to Integrated tax as they apply in relationto Central tax.

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2.15The petitioner further states that the Central Governmentvide Notification No.13/2017- Central Tax, dated 28.06.2017and Notification No.6/2017 – integrated tax dated 28.06.2017has fixed the rate of interest from the 1[st] day of July, 2017at 6% p.a. and 9% p.a. for the purposes of Section 56 andDproviso to Section 56 of CGST Act, 2017 respectively.Copies of the aforesaid notifications are enclosed herewithmarked at Annexure & and Annexure B respectively.

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2.19The petitioner states further that it received the refund ofEintegrated tax paid on export of goods after substantial periodof delay. Details of refund claimed, date of application ofrefund and actual date of grant of refund for the month ofJuly is enclosed herewith and marked as Annexure-D”

3.1 Details of 15 (Fifteen) refunds made to said writ petitionerFshowed that there was delay ranging from 94 to 290 days.

3.2 In the circumstances it was prayed inter alia:- “a)to issue writ of mandamus and/ or any other appropriatewrit(s) for directions is the Respondents for providingappropriate compensation as well as interest, for delay inGthe granting of refund;”

4. The first case arises out of Special Civil Application No.18591of 2018 filed by M/s. Willowood Chemicals Pvt. Ltd. submitting thatsaid Writ Petitioner was entitled on the basis of Section 16 of the IGSTAct read with Section 54 of the CGST Act for compensation in receiptH

of delayed payment as detailed in Annexure D of the petition, which inturn dealt with 12 refunds with delay ranging between 94 to 290 days.The special civil application had thus prayed for appropriate compensation.

5. In both the petitions it was submitted that inaction leading toinordinate delay in granting refunds was per se arbitrary and that theinordinate delay impacted the working capacity of the Writ Petitionersthereby reducing their ability to conduct business and as such appropriatecompensation ought to be awarded along with interest for delay.

The submissions were opposed by the learned counsel appearingfor the Revenue.

6. The High Court considered the rival submissions in light of thestatutory provisions and relied upon certain decisions including the decisionof this Court in K.T. Plantation Pvt. Ltd. and Anr. v. State ofKarnataka[4], Sandvik Asia Ltd. v. Commissioner of Income Tax-IPune and others[5]and Commissioner of Income Tax, Gujarat v.Gujarat Fluoro Chemicals[6]. In its judgment dated 10.7.2019 which isunder challenge in the second case, the High Court concluded:

“22. The position of law appears to be well settled. The provisionsrelating to an interest of delated payment of refund have beenconsistently held as beneficial and non-discriminatory. It is truethat in the taxing statute the principles of equity may have littlerole to play, but at the same time, any statute in taxation mattershould also meet with the test of constitutional provision.

23. The respondents have not explained in any manner the issueof delay as raised by the writ applicants by filing any reply.

24. The chart indicating the delay referred to above speaks foritself.

25. In the overall view of the matter, we are inclined to hold therespondents liable to pay simple interest on the delayed paymentat the rate of 9% per annum. The authority concerned shall nookinto the chart provided by the writ-applicants, which is at Page-30, Annexure-D to the writ application and calculate the aggregateamount of refund. On the aggregate amount of refund, the writ- 4 (2011) 9 SCC 1

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Aapplicants are entitled to 9% per annum interest from the date offiling of the GSTR-03. The respondents shall undertake thisexercise at the earliest and calculate the requisite amount towardthe interest. Let this exercise be undertaken and completed withina period of two months from the date of receipt of the writ of thisorder. The requisite amount towards the interest shall be paid toBthe writ-applicants within a period of two months form the date ofreceipt of the writ of this order.”

7. The first case was then disposed of on the same day with thefollowing observations:- C“4. For the reasons assigned in the Special Civil ApplicationNo15925 of 2018, decided on 10/07/2019, this writ application isallowed to the extent that the writ applicants are entitled to theinterest for the delayed payment at the rate of 9% per annum.The authority concerned shall look into the chart provided by thewrit applicants, which is at Page 30, Annexure D to the writDapplication and calculate the aggregate refund, the writ applicantsare entitled to 9% per annum interest from the date of filing of theGSTR38. The respondents shall undertake this exercise at theearliest and calculate the requisite amount towards interest. Letthis exercise be undertaken and completed within a period of twoEmonths from the date of receipt of the writ of this order. Therequisite amount towards the interest shall be paid to the writapplicants within a period of two months from the date of receiptof the writ of this order.”

8. The appellant being aggrieved, preferred Review Petitions inFboth the cases. It was submitted inter alia:

“4. It is respectfully submitted that this Hon’ble Court has directedthe respondent authority to pay simple interest on the delayedpayment at the rate of 9% per annum from the date of filing ofthe GSTR-3B.

G5. It is respectfully submitted that as per section 56 of the IGSTNet Interest at the rate of not exceeding six percent may be givenwhereas by order dated 10.07.2011 this Hon’ble court was pleasedto give interest at the rate of 9%.”

By separate orders dated 13.3.2020 passed in both the cases, theHReview Petitions preferred by the appellant were dismissed.

9. The aforestated judgments and orders passed by the High Courtare under challenge in these appeals. The appellants do not dispute theeligibility of the respondents for receiving interest for delayed paymentof claims but their submission is that in terms of the relevant statutoryprovision, the interest could be awarded at the rate of 6 per cent and not9 per cent per annum. Considering the stand taken by the appellants, atthe interim stage, this Court directed the appellants to make good paymentof interest at the rate of 6 per cent. Accordingly, the amounts representinginterest at that rate have since then been made over.

10. We have heard Mr. N. Venkataraman, learned AdditionalSolicitor General on behalf of the appellants in both the matters whileMr. Vinay Shraff, learned Advocate appeared for the respondents inboth the cases.

11. Before we deal with the controversy in question, we mayextract the relevant statutory provisions: -

A) Sections 16 and 20 of the IGST Act are as follows:- “16. Zero rated supply - (1) “zero rated supply” means any of thefollowing supplies of goods or services or both, namely:––

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special EconomicZone developer or a Special Economic Zone unit.

(2) Subject to the provisions of sub-section (5) of section 17 ofthe Central Goods and Services Tax Act, credit of input tax maybe availed for making zero-rated supplies, notwithstanding thatsuch supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligibleto claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letterof Undertaking, subject to such conditions, safeguards andprocedure as may be prescribed, without payment of integratedtax and claim refund of unutilized input tax credit; or (b) he may supply goods or services or both, subject to suchconditions, safeguards and procedure as may be prescribed, onpayment of integrated tax and claim refund of such tax paid ongoods or services or both supplied.

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[2022] 14 S.C.R.

A20. Subject to the provisions of this Act and the rules madethereunder, the provisions of Central Goods and Services Tax Actrelating to,––

(i) scope of supply;(ii) composite supply and mixed supply;(iii) time and value of supply;(iv) input tax credit;(v) registration; B

(vi) tax invoice, credit and debit notes; C

(vii) accounts and records;(viii) returns, other than late fee;(ix) payment of tax;D(x) tax deduction at source;(xi) collection of tax at source;(xii) assessment;(xiii) refunds;E(xiv) audit;(xv) inspection, search, seizure and arrest;(xvi) demands and recovery;(xvii) liability to pay in certain cases;F(xviii) advance ruling;(xix) appeals and revision;(xx) presumption as to documents;(xxi) offences and penalties;G(xxii) job work;(xxiii) electronic commerce;(xxiv) transitional provisions; and

(xxv) miscellaneous provisions including the provisions relating tothe imposition of interest and penalty, shall, mutatis mutandis, apply, so far as may be, in relation tointegrated tax as they apply in relation to central tax as if they areenacted under this Act:

Provided that in the case of tax deducted at source, thedeductor shall deduct tax at the rate of two per cent. from thepayment made or credited to the supplier:

Provided further that in the case of tax collected at source,the operator shall collect tax at such rate not exceeding two percent, as may be notified on the recommendations of the Council,of the net value of taxable supplies:

Provided also that for the purposes of this Act, the value ofa supply shall include any taxes, duties, cesses, fees and chargeslevied under any law for the time being in force other than thisAct, and the Goods and Services Tax (Compensation to States)Act, if charged separately by the supplier:

Provided also that in cases where the penalty is leviableunder the Central Goods and Services Tax Act and the State Goodsand Services Tax Act or the Union Territory Goods and ServicesTax Act, the penalty leviable under this Act shall be the sum totalof the said penalties.

Provided also that in cases where the appeal is to be filedbefore the Appellate Authority or the Appellate Tribunal, themaximum amount payable shall be fifty crore rupees and onehundred crore rupees respectively.”

(B) Sections 54 and 56 of the CGST Act are as under:- “54. Refund of tax - (1) Any person claiming refund of any taxand interest, if any, paid on such tax or any other amount paid byhim, may make an application before the expiry of two yearsfrom the relevant date in such form and manner as may beprescribed:

Provided that a registered person, claiming refund of any balancein the electronic cash ledger in accordance with the provisions ofsub-section (6) of section 49, may claim such refund in the returnfurnished under section 39in such manner as may be prescribed.

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(2) A specialised agency of the United Nations Organisation orany Multilateral Financial Institution and Organisation notified underthe United Nations (Privileges and Immunities) Act, 1947,Consulate or Embassy of foreign countries or any other person orclass of persons, as notified under section 55, entitled to a refundof tax paid by it on inward supplies of goods or services or both,may make an application for such refund, in such form and manneras may be prescribed, before the expiry of six months from thelast day of the quarter in which such supply was received.

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(3) Subject to the provisions of sub-section (10), a registered personmay claim refund of any unutilised input tax credit at the end ofany tax period:

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Provided that no refund of unutilised input tax credit shall be allowedin cases other than––

(i) zero rated supplies made without payment of tax; D

(ii) where the credit has accumulated on account of rate of tax oninputs being higher than the rate of tax on output supplies (otherthan nil rated or fully exempt supplies), except supplies of goodsor services or both as may be notified by the Government on therecommendations of the Council:

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Provided further that no refund of unutilised input tax credit shallbe allowed in cases where the goods exported out of India aresubjected to export duty:

Provided also that no refund of input tax credit shall be allowed, ifthe supplier of goods or services or both avails of drawback inrespect of central tax or claims refund of the integrated tax paidon such supplies.

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(4) The application shall be accompanied by—

(a) such documentary evidence as may be prescribed to establishthat a refund is due to the applicant; and G

(b) such documentary or other evidence (including the documentsreferred to in section 33) as the applicant may furnish to establishthat the amount of tax and interest, if any, paid on such tax or anyother amount paid in relation to which such refund is claimed wascollected from, or paid by, him and the incidence of such tax andHinterest had not been passed on to any other person:

Provided that where the amount claimed as refund is less thantwo lakh rupees, it shall not be necessary for the applicant tofurnish any documentary and other evidences but he may file adeclaration, based on the documentary or other evidences availablewith him, certifying that the incidence of such tax and interest hadnot been passed on to any other person.

(5) If, on receipt of any such application, the proper officer issatisfied that the whole or part of the amount claimed as refund isrefundable, he may make an order accordingly and the amount sodetermined shall be credited to the Fund referred to in section 57.

(6) Notwithstanding anything contained in sub-section (5), theproper officer may, in the case of any claim for refund on accountof zero-rated supply of goods or services or both made byregistered persons, other than such category of registered personsas may be notified by the Government on the recommendationsof the Council, refund on a provisional basis, ninety per cent. ofthe total amount so claimed, excluding the amount of input taxcredit provisionally accepted, in such manner and subject to suchconditions, limitations and safeguards as may be prescribed andthereafter make an order under sub-section (5) for final settlementof the refund claim after due verification of documents furnishedby the applicant.

(7) The proper officer shall issue the order under sub-section (5)within sixty days from the date of receipt of application completein all respects.

(8) Notwithstanding anything contained in sub-section (5), therefundable amount shall, instead of being credited to the Fund, bepaid to the applicant, if such amount is relatable to—

(a) refund of tax paid on export of goods or services or both or oninputs or input services used in making such exports; (b) refund of unutilized input tax credit under sub-section (3);

(c) refund of tax paid on a supply which is not provided, eitherwholly or partially, and for which invoice has not been issued, orwhere a refund voucher has been issued; (d) refund of tax in pursuance of section 77; A

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(e) the tax and interest, if any, or any other amount paid by theapplicant, if he had not passed on the incidence of such tax andinterest to any other person; or A

(f) the tax or interest borne by such other class of applicants asthe Government may, on the recommendations of the Council, bynotification, specify.

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(8A) The Government may disburse the refund of the State tax insuch manner as may be prescribed.

(9) Notwithstanding anything to the contrary contained in anyjudgment, decree, order or direction of the Appellate Tribunal orany court or in any other provisions of this Act or the rules madethereunder or in any other law for the time being in force, norefund shall be made except in accordance with the provisions ofsub-section (8).

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(10) Where any refund is due under sub-section (3) to a registeredperson who has defaulted in furnishing any return or who isrequired to pay any tax, interest or penalty, which has not beenstayed by any court, Tribunal or Appellate Authority by thespecified date, the proper officer may—

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(a) withhold payment of refund due until the said person hasfurnished the return or paid the tax, interest or penalty, as thecase may be; E

(b) deduct from the refund due, any tax, interest, penalty, fee orany other amount which the taxable person is liable to pay butwhich remains unpaid under this Act or under the existingFlaw. Explanation.––For the purposes of this sub-section, theexpression “specified date” shall mean the last date for filing anappeal under this Act.

(11) Where an order giving rise to a refund is the subject matterof an appeal or further proceedings or where any other proceedingsGunder this Act is pending and the Commissioner is of the opinionthat grant of such refund is likely to adversely affect the revenuein the said appeal or other proceedings on account of malfeasanceor fraud committed, he may, after giving the taxable person anopportunity of being heard, withhold the refund till such time as hemay determine.

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(12) Where a refund is withheld under sub-section (11), the taxableperson shall, notwithstanding anything contained in section 56, beentitled to interest at such rate not exceeding six per cent. as maybe notified on the recommendations of the Council, if as a resultof the appeal or further proceedings he becomes entitled to refund.

(13) Notwithstanding anything to the contrary contained in thissection, the amount of advance tax deposited by a casual taxableperson or a non-resident taxable person under sub-section (2)of section 27, shall not be refunded unless such person has, inrespect of the entire period for which the certificate of registrationgranted to him had remained in force, furnished all the returnsrequired under section 39.

(14) Notwithstanding anything contained in this section, no refundunder sub-section (5) or sub-section (6) shall be paid to anapplicant, if the amount is less than one thousand rupees.

Explanation.—For the purposes of this section,––

(1) “refund” includes refund of tax paid on zero-rated supplies ofgoods or services or both or on inputs or input services used inmaking such zero-rated supplies, or refund of tax on the supply ofgoods regarded as deemed exports, or refund of unutilised inputtax credit as provided under sub-section (3).

(2) “relevant date” means—

(a) in the case of goods exported out of India where a refund oftax paid is available in respect of goods themselves or, as the casemay be, the inputs or input services used in such goods,––

(i) if the goods are exported by sea or air, the date on which theship or the aircraft in which such goods are loaded, leaves India;or

(ii) if the goods are exported by land, the date on which suchgoods pass the frontier; or

(iii) if the goods are exported by post, the date of despatch ofgoods by the Post Office concerned to a place outside India; (b) in the case of supply of goods regarded as deemed exportswhere a refund of tax paid is available in respect of the goods, thedate on which the return relating to such deemed exports isfurnished; A

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A(c) in the case of services exported out of India where a refundof tax paid is available in respect of services themselves or, as thecase may be, the inputs or input services used in such services,the date of––

(i) receipt of payment in convertible foreign exchange 3 ”or inBIndian rupees wherever permitted by the Reserve Bank of India”,where the supply of services had been completed prior to thereceipt of such payment; or

(ii) issue of invoice, where payment for the services had beenreceived in advance prior to the date of issue of the invoice;C(d) in case where the tax becomes refundable as a consequenceof judgment, decree, order or direction of the Appellate Authority,Appellate Tribunal or any court, the date of communication ofsuch judgment, decree, order or direction; (e) in the case of refund of unutilised input tax credit under clauseD(ii) of the first proviso to sub-section (3), the due date for furnishingof return under section 39 for the period in which such claim forrefund arises; (f) in the case where tax is paid provisionally under this Act or therules made thereunder, the date of adjustment of tax after theEfinal assessment thereof; (g) in the case of a person, other than the supplier, the date ofreceipt of goods or services or both by such person; and (h) in any other case, the date of payment of tax. Refund in certaincases.

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56. Interest on delayed refunds - If any tax ordered to be refundedunder sub-section (5) of section 54 to any applicant is not refundedwithin sixty days from the date of receipt of application underGsubsection (1) of that section, interest at such rate not exceedingsix per cent. as may be specified in the notification issued by theGovernment on the recommendations of the Council shall bepayable in respect of such refund from the date immediately afterthe expiry of sixty days from the date of receipt of applicationunder the said sub-section till the date of refund of such tax:

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Provided that where any claim of refund arises from an orderpassed by an adjudicating authority or Appellate Authority orAppellate Tribunal or court which has attained finality and thesame is not refunded within sixty days from the date of receipt ofapplication filed consequent to such order, interest at such ratenot exceeding nine per cent. as may be notified by the Governmenton the recommendations of the Council shall be payable in respectof such refund from the date immediately after the expiry of sixtydays from the date of receipt of application till the date of refund.

Explanation.––For the purposes of this section, where any orderof refund is made by an Appellate Authority, Appellate Tribunal orany court against an order of the proper officer under sub-section(5) of section 54, the order passed by the Appellate Authority,Appellate Tribunal or by the court shall be deemed to be an orderpassed under the said sub-section (5)”

12. These provisions show that a registered person making exportof goods outside India, is entitled in terms of Section 16 of the IGST Actto claim refund of either unutilized input tax credit of export of goodsunder bond or letter of undertaking or refund of integrated tax paid onexport of goods. In terms of Section 20 of the IGST Act, any claim forrefund is to be governed by the provisions of the CGST Act which wouldapply mutatis mutandis as if they were enacted in the IGST Act. Theapplication for refund, therefore, is required to be preferred in accordancewith Section 54 of the CGST Act. According to Section 56 of the CGSTAct, if an applicant is not refunded any tax ordered to be refunded bythe Proper Officer under Section 54(5) within 60 days from the receiptof the application, interest at such rate not exceeding 6 per cent wouldbecome payable after the expiry of 60 days from the date of receipt ofapplication till the date of refund of such tax. The proviso to said Sectionprescribes that where any claim of refund arises from an order passedby an Adjudicating Authority or Appellate Authority or Appellate Tribunalor Court and if the same is not refunded within 60 days from the date ofreceipt of an application filed consequent to such an order, the rate ofinterest payable would be 9 per cent.

13. The instant cases have not arisen from any order passed byan Adjudicating Authority or Appellate Authority or Appellate Tribunalor Court and the cases are strictly within the scope of the principalprovision of Section 56 and not under the proviso thereof. In light of AB

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Athese provisions, the question which arises for consideration is whetherthe High Court was justified in awarding interest at the rate of 9 per centper annum.

14. Before we deal with the question, it must be stated that initiallya bench of two Judges of this Court in Union of India and others v.BOrient Enterprises and Another[7]had observed that a Writ Petitionunder Article 226 of the Constitution filed solely for relief for payment ofinterest on delayed refund would not be maintainable. For facility, therelevant portion from the said decision is quoted here:

“6. In Suganmal [AIR 1965 SC 1740 : 56 ITR 84 : 16 STC 398]Cthis Court has laid down that a writ petition under Article 226 ofthe Constitution solely praying for the issue of a writ of mandamusdirecting the State to refund the money is not ordinarilymaintainable for the simple reason that a claim for such a refundcan always be made in a suit against the authority which hadillegally collected the money as a tax. This Court has made aDdistinction between a direction for refund given by way ofconsequential order in a case where the legality of the assessmentis questioned and a case where the petition is only for the purposeof seeking refund. It has been observed:

“We do not consider it proper to extend the principleEjustifying the consequential order directing the refund of amountillegally realised, when the order under which the amounts hadbeen collected has been set aside, to cases in which only ordersfor the refund of money are sought. The parties had the rightto question the illegal assessment orders on the ground of theirFillegality or unconstitutionality and, therefore, could take actionunder Article 226 for the protection of their fundamental right,and the courts, on setting aside the assessment orders, exercisedtheir jurisdiction in proper circumstances to order theconsequential relief for the refund of the tax illegally realised.We do not find any good reason to extend this principle and,Gtherefore, hold that no petition for the issue of a writ ofmandamus will be normally entertained for the purpose ofmerely ordering a refund of money to the return of which thepetitioner claims a right.”

7. The Court has emphasised that there was no legal right in theappellant who had filed the writ petition to claim the refund underthe relevant statute.

8. In the present case also till the insertion of Section 27-A in theAct by Act 22 of 1995 there was no right entitling payment ofinterest on delayed refund under the Act. Such a right wasconferred for the first time by the said provision. Act 22 of 1995also inserted Section 28-AA which provides for payment of intereston delayed payment of duty by a person who is liable to pay theduty. Thus at the relevant time there was no statutory right entitlingthe respondents to payment of interest on delayed refund and thewrit petition filed by them was not for the enforcement of a legalright available to them under any statute. The claim for interestwas in the nature of compensation for wrongful retention by theappellants of money that was collected from the respondents byway of customs duty, redemption fine and penalty. In view of thelaw laid down by this Court in Suganmal [AIR 1965 SC 1740: 56ITR 84: 16 STC 398] a writ petition seeking the relief of paymentof interest on delayed refund of the amount so collected couldnot, in our opinion, be maintained. The decisions on which reliancehas been placed by Shri Rawal were cases where the legality ofthe orders requiring payment of tax or duty were challenged andthe High Court in exercise of its jurisdiction under Article 226 ofthe Constitution, while setting aside the said orders, has directedthe refund of the amount so collected with interest. The directionfor payment of interest in these cases was by way of consequentialrelief along with the main relief of setting aside the order imposingthe tax or duty. Those cases stand on a different footing and haveno application to the present case. The appeal is, therefore,allowed, the impugned judgment of the High Court is set asideand the writ petition filed by the respondents before the HighCourt is dismissed. No order as to costs.”

15. However, subsequently another bench of two Judges of thisCourt in Godavari Sugar Mills Ltd.[7]in more or less identicalcircumstances settled the issue and found the Writ Petition to bemaintainable. The observations of this Court were:

“7. The High Court relying upon the decision of this Courtin Suganmal v. State of M.P. [AIR 1965 SC 1740] has held that

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the prayer in the writ petition being one for payment of interest, itshould be considered to be a writ petition filed to enforce a moneyclaim and therefore, not maintainable. The observationsin Suganmal [AIR 1965 SC 1740] related to a claim for refundof tax and have to be understood with reference to the nature ofthe claim made therein. The decision in Suganmal [AIR 1965SC 1740] has been explained and distinguished in severalsubsequent cases, including in U.P. Pollution ControlBoard v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABLInternational Ltd. v. Export Credit GuaranteeCorpn. of IndiaLtd. [(2004) 3 SCC 553] The legal position becomes clear whenthe decision in Suganmal [AIR 1965 SC 1740] is read with theother decisions of this Court on the issue, referred to below:

(i) Normally, a petition under Article 226 of the Constitutionof India will not be entertained to enforce a civil liability arisingout of a breach of a contract or a tort to pay an amount of moneydue to the claimants. The aggrieved party will have to agitate thequestion in a civil suit. But an order for payment of money maybe made in a writ proceeding, in enforcement of statutoryfunctions of the State or its officers. (Vide BurmahConstruction Co. v. State of Orissa [AIR 1962 SC 1320 : 1962Supp (1) SCR 242] .)

(ii) If a right has been infringed—whether a fundamentalright or a statutory right—and the aggrieved party comes to theCourt for enforcement of the right, it will not be giving completerelief if the Court merely declares the existence of such right orthe fact that existing right has been infringed. The High Court,while enforcing fundamental or statutory rights, has the power togive consequential relief by ordering payment of money realisedby the Government without the authority of law. (Vide State ofM.P. v. Bhailal Bhai [AIR 1964 SC 1006].)

(iii) A petition for issue of writ of mandamus will notnormally be entertained for the purpose of merely ordering a refundof money, to the return of which the petitioner claims a right. Theaggrieved party seeking refund has to approach the civil court forclaiming the amount, though the High Courts have the powerto pass appropriate orders in the exercise of the power conferred under Article 226 for payment of money.(Vide Suganmal v. State of M.P. [AIR 1965 SC 1740])

(iv) There is a distinction between cases where aclaimant approaches the High Court seeking the relief ofobtaining only refund and those where refund is sought as aconsequential relief after striking down the order ofassessment, etc. While a petition praying for mere issue of a writof mandamus to the State to refund the money alleged to havebeen illegally collected is not ordinarily maintainable, if the allegationis that the assessment was without a jurisdiction and the taxescollected was without authority of law and therefore therespondents had no authority to retain the money collected withoutany authority of law, the High Court has the power to direct refundin a writ petition. (Vide Salonah Tea Co. Ltd. v. Supdt. ofTaxes [(1988) 1 SCC 401 : 1988 SCC (Tax) 99 (2)]

(v) It is one thing to say that the High Court has no powerunder Article 226 of the Constitution to issue a writ of mandamusfor making refund of the money illegally collected. It is yet anotherthing to say that such power can be exercised sparingly dependingon facts and circumstances of each case. For instance, wherethe facts are not in dispute, where the collection of money waswithout the authority of law and there was no case of undueenrichment, there is no good reason to deny a relief of refund tothe citizens. But even in cases where collection of cess, levy ortax is held to be unconstitutional or invalid, refund is not an automaticconsequence but may be refused on several grounds dependingon facts and circumstances of a given case. (Vide U.P. PollutionControl Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549])

(vi) Where the lis has a public law character, or involves aquestion arising out of public law functions on the part of theState or its authorities, access to justice by way of a public lawremedy under Article 226 of the Constitution will not be denied.(Vide Sanjana M. Wig v. Hindustan Petroleum CorporationLtd. (2005) 8 SCC 242)

We are therefore of the view that reliance upon Suganmalwas misplaced to hold that the writ petition filed by the appellantwas not maintainable.”

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A16. We, therefore, proceed to consider the merits. Turning to thebasic question it must be noted that in the following cases, this Courtdealt with the question as to payment of interest on the amount due byway of refund:

(A) In Modi Industries Ltd. and another v. Commissioner ofBIncome Tax and Another[8]a bench of three Judges of this Court wascalled upon to consider the effect of Section 214 of the Income Tax Act,1961, and the questions which arose were set out as under:

“We shall now indicate how the controversy relating to the meaningof the expression “regular assessment” arises: an assessee paysCadvance tax according to his estimate of his income during thefinancial year relevant to the particular assessment year. He thenfiles a return and an assessment is made under Section 143. It isfound that he has paid more amount by way of advance tax thanthe amount of tax assessed. He will be refunded the extra amountwith interest calculated from the first day of April of thatDassessment year to the date of assessment. No difficulty arises insuch a case. The difficulty arises in the following situation: indeedit is one of the many situations - not satisfied with the order ofassessment, the assessee files an appeal. The appeal is allowedas a consequence of which, the assessment order is revised. As aEresult of such revised assessment made pursuant to the appellateorder, the tax refundable to the assessee becomes larger - saywhereas, according to the original assessment he was entitled torefund of Rs.10,000/-, he becomes entitled to a total refund ofRs.15,000/- as a result of revised assessment made pursuant tothe appellate order. The question is - on what amount and uptoFwhich date is the interest payable? On being elaborated, thequestion yields the following sub-questions:

(a) is the interest payable only on Rs. 10,000/- and if so, whetherthe interest is payable till the date of first/original assessment ortill the date of the revised assessment?G(b) is the interest payable on Rs.15,000/- and if payable, is it payableonly till the date of first/original assessment or till the date of therevised assessment?

After considering various decisions on the point, the conclusiondrawn by the Court was:

“The argument, which was upheld in some of the cases now underappeal, is that it will be inequitable if the assessee does not getinterest on the amount of advance tax paid, when the amount paidin advance is refunded pursuant to an appellate order. This is nota question of equity. There is no right to get interest on refundexcept as provided by the statute.The interest on excess amountof advance tax under Section 214is not paid from the date ofpayment of the tax. Nor is it paid till the date of refund. It is paidonly upto the date of the regular assessment. No interest is at allpaid on excess amount of tax collected by deduction at source.Before introduction of Section 244(1A)the assessee was notentitled to get any interest from the date of payment of tax uptothe date of the order as a result of which excess realisation of taxbecame refundable. Interest under Section 243 or Section 244waspayable only when the refund was not made within the stipulatedperiod upto the date of refund. But, if the assessment order wasreduced in appeal, no interest was payable from the date ofpayment of tax pursuant to the assessment order to the date ofthe appellate order.

Therefore, interpretation of Section 214 or any other sectionof the Act should not be made on the assumption that interest hasto be paid whenever an amount which has been retained by thetax authority in exercise of statutory power becomes refundableas a result of any subsequent proceeding.

(Emphasis supplied)

(B) In Godavari Sugar Mills Ltd.[7], a bench of two Judges ofthis Court considered the question whether interest on the compensationamount at the rate of 9 per cent per annum could be awarded when theterms of Section 6 of the Maharashtra Agriculture Lands (Ceiling ofHoldings) Act, 1961 prescribed payment of interest only at the rate of 3per cent per annum. The discussion on the point was:

“9. There is considerable force in the submissions of Ms MadhaviDivan, the learned counsel for the respondents that the decisionsof the Bombay High Court in Krishnakumar [WP No. 83 of 1986decided on 29-6-1991 (Bom)] and Changdeo [WP No. 3805 of

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2000 decided on 7-7-2000 (Bom)] are not sound, as theycompletely ignore Section 26 of the Act, while awarding interestat 9% per annum on the belated payment of compensation.

10. The question as to when and in what circumstances, interestcould be awarded on belated payment of compensation, wasconsidered by this Court in Union of India v. ParmalSingh [(2009) 1 SCC 618] . This Court first referred to the generalprinciple and then the exceptions thereto, as under: (SCC pp. 624-25, paras 12-13)

“12. When a property is acquired, and law provides for paymentof compensation to be determined in the manner specified,ordinarily compensation shall have to be paid at the time of takingpossession in pursuance of acquisition. By applying equitableprinciples, the courts have always awarded interest on the delayedpayment of compensation in regard to acquisition of any property.…

13. … The said general principle will not apply in twocircumstances. One is where a statute specifies or regulates theinterest. In that event, interest will be payable in terms of theprovisions of the statute. The second is where a statute or contractdealing with the acquisition specifically bars or prohibits paymentof interest on the compensation amount. In that event, interestwill not be awarded. Where the statute is silent about interest,and there is no express bar about payment of interest, any delayin paying the compensation or enhanced compensation foracquisition would require award of interest at a reasonable rateon equitable grounds.”

This Court, dealing with an acquisition under the Defence of IndiaAct, 1962 (which did not contain any provision either requiring orprohibiting payment of interest), upheld the award of interest at6% per annum.

11. Section 24 of the Act requires the Collector, after possessionof surplus land was taken over under Section 21(4) of the Act, tocause public notice requiring persons interested to lodge theirclaims. Section 25 of the Act provides for determination ofcompensation and apportionment thereof. Section 26 deals withmode of payment of amount of compensation and the same isextracted below:

“26. Mode of payment of amount of compensation.—(1) Theamount of compensation may, subject to the provisions of sub-section (3), be payable in transferable bonds carrying interestat three per cent per annum.

(2) The bonds shall be—

(a) of the following denominations, namely— Rs. 50; Rs. 100;Rs. 200; Rs. 500; Rs. 1000; Rs. 5000 and Rs. 10,000; and (b) of two classes—one being repayable during a period of twentyyearsfrom the date of issue by equated annual instalment ofprincipal and interest, and the other being redeemable at par atthe end of a period of twenty years from the date of issue. Itshall be at the option of the person receiving compensation tochoose payment in one or other class of bonds, or partly in oneclass and partly in another.

(3) Where the amount of compensation or any part thereof, cannotbe paid in the aforesaid denomination, it may be paid in cash.”

(emphasis supplied)

The said section contemplates the payment of compensation withinterest at 3% per annum in annual instalments spread over aperiod of 20 years or at the end of 20 years. It also contemplatespayment being made either by transferable bonds or in cash. Sub-section (3) of Section 26 enabling payment of compensation bycash, in cases where it could not be paid by such bonds, does notdisturb the rate of interest, which is 3% per annum for 20 years,provided in sub-section (1) thereof. We are therefore of the viewthat whether the payment is made by transferable bonds or bycash, the rate of interest can be only at 3% per annum for aperiod of 20 years from the date of taking possession.

12. The next question that requires consideration is about the rateof interest if the payment is not made even after 20 years, andwhether it should be only at the rate of 3% per annum, even after20 years. Section 26 is silent about the rate of interest payable, ifthe compensation is not paid within 20 years. We are therefore ofthe view that Section 26 contemplates payment of the compensationwithin 20 years from the date of taking possession with interest at3% per annum; and for the period beyond 20 years, the said A

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Aprovision regarding interest will cease to apply and the generalequitable principles relating to interest will apply; and interest canbe awarded at any reasonable rate, in the discretion of the court.Interest at the rate of 6% per annum, beyond 20 years would beappropriate and payable on equitable principles.”

B(C) In Sandvik Asia Ltd.[5], a bench of two Judges of this Courtwas called upon to consider whether the inordinate delay of about 12 to17 years in making a refund would entitle grant of interest. In the factsof that case, interest at the rate of 9 per cent per annum from 31.03.1986to 27.03.1998 was granted. Even while doing so this Court observed:

C“48. There cannot be any doubt that the award of interest on therefunded amount is as per the statutory provisions of law as itthen stood and on the peculiar facts and circumstances of eachcase. When a specific provision has been made under the statute,such provision has to govern the field. Therefore, the court has totake all relevant factors into consideration while awarding theDrate of interest on the compensation.”

(D) In Gujarat Fluoro Chemicals[6], the correctness of thedecision in Sandvik Asia Ltd.[5] came up for consideration before a benchof three Judges of this Court, and the matter was considered thus:

E“3. In order to answer the aforesaid issue before us, we havecarefully gone through the judgment of this Court in Sandvikcase [Sandvik Asia Ltd. v. CIT, (2006) 2 SCC 508] and the orderof reference. We have also considered the submissions made bythe parties to the lis.

F4. We would first throw light on the reasoning and the decision ofthis Court on the core issue in Sandvik case [Sandvik AsiaLtd. v. CIT, (2006) 2 SCC 508]. The only issue formulated by thisCourt for its consideration and decision was whether an assesseeis entitled to be compensated by the Income Tax Department forthe delay in paying interest on the refunded amount admittedlyGdue to the assessee. This Court in the facts of the said case hadnoticed that there was delay of various periods, ranging from 12to 17 years, in such payment by the Revenue. This Court hadfurther referred to the several decisions which were brought toits notice and also referred to the relevant provisions of the Actwhich provide for refunds to be made by the Revenue when aH

superior forum directs refund of certain amounts to an assesseewhile disposing of an appeal, revision, etc. Since there was aninordinate delay on the part of the Revenue in refunding the amountdue to the assessee this Court had thought it fit that the assesseeshould be properly and adequately compensated and therefore inpara 51 of the judgment, the Court while compensating theassessee had directed the Revenue to pay a compensation byway of interest for two periods, namely, for Assessment Years1977-1978, 1978-1979, 1981-1982, 1982-1983 in a sum of Rs40,84,906 and interest @ 9% from 31-3-1986 to 27-3-1998 and indefault, to pay the penal interest @ 15% per annum for theaforesaid period.

5. In our considered view, the aforesaid judgment has beenmisquoted and misinterpreted by the assessees and also by theRevenue. They are of the view that in Sandvik case [SandvikAsia Ltd. v. CIT, (2006) 2 SCC 508] this Court had directed theRevenue to pay interest on the statutory interest in case of delayin the payment. In other words, the interpretation placed is thatthe Revenue is obliged to pay an interest on interest in the eventof its failure to refund the interest payable within the statutoryperiod.

6. As we have already noticed, in Sandvik case [Sandvik AsiaLtd. v. CIT, (2006) 2 SCC 508] this Court was considering theissue whether an assessee who is made to wait for refund ofinterest for decades be compensated for the great prejudice causedto it due to the delay in its payment after the lapse of statutoryperiod. In the facts of that case, this Court had come to theconclusion that there was an inordinate delay on the part of theRevenue in refunding certain amount which included the statutoryinterest and therefore, directed the Revenue to pay compensationfor the same not an interest on interest.”

17. Since reliance was placed by the High Court on the decisionof the Constitution Bench of this Court in K.T. Plantation Pvt. Ltd. andAnr.[4], we must note that what arose for consideration in that case, wasthe constitutional validity of the Devika Rani Roerich Estate (Acquisition& Transfer) Act, 1996, and Section 110 of the Karnataka Lands ReformsAct, 1996 and certain notifications issued by the State Government. The A

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Aquestions which arose for consideration were set out in paragraph 25 ofthe decision as under:- “Whether the relevant provisions violated the basic structure ofthe Constitution in so far as they conferred power on the executivegovernment for withdrawal of exception without hearing andBwithout reasons and whether the provisions of the AcquisitionAct were protected by Article 31(A) of the Constitution andwhether they were violative of Article 300(A) of the Constitution?”

After dealing with these questions, the reference was answered thus:

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We, therefore, answer the reference as follows:

(a) Section 110 of the Land Reforms Act and the Notificationdated 8-3-1994 are valid, and there is no excessive delegation oflegislative power on the State Government.

(b) Non-laying of the Notification dated 8-3-1994 under Section140 of the Land Reforms Act before the State Legislature is acurable defect and it will not affect the validity of the notificationor action taken thereunder.

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(c) The Acquisition Act is protected by Article 31-A of theConstitution after having obtained the assent of the President andEhence immune from challenge under Article 14 or 19 of theConstitution.

(d) There is no repugnancy between the provisions of the LandAcquisition Act, 1894 and the Rocrich and Devika Rani RocrichEstate (Acquisition & Transfer) Act, 1996 (in short “the AcquisitionFAct”), and hence no assent of the President is warranted underArticle 254(2) of the Constitution.

(e) Public purpose is a precondition for deprivation of a personfrom his property under Article 300-A and the right to claimcompensation is also inbuilt in that article and when a person isGdeprived of his property the State has to justify both the groundswhich may depend on scheme of the statute, legislative policy,object and purpose of the legislature and other related factors.

(f) Statute, depriving a person of his property is, therefore,amenable to judicial review on grounds hereinbefore discussed.”

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The aforestated answers and especially one at serial (e) showthe context in which the issue of compensation was considered by thisCourt, which is completely distinct and different from the issue withwhich we are presently concerned.

18. Coming back to the present cases, the relevant provision hasprescribed rate of interest at 6 per cent where the case for refund isgoverned by the principal provision of Section 56 of the CGST Act. Ashas been clarified by this Court in Modi Industries Ltd.[9]and GodavariSugar Mills Ltd.[7]wherever a statute specifies or regulates the interest,the interest will be payable in terms of the provisions of the statute.Wherever a statute, on the other hand, is silent about the rate of interestand there is no express bar for payment of interest, any delay in payingthe compensation or the amounts due, would attract award of interest ata reasonable rate on equitable grounds. It is precisely for this reasonthat paragraph 9 of the decision in Godavari Sugar Mills Ltd.[7] acceptedthe submission made by the learned counsel for the respondents andconfined the rate of interest to the prescription made in the statute. Theaward of interest at a rate in excess of what was prescribed by thestatute was only for a period beyond 20 years where the matter was notstrictly covered by the statute and as such it would be in the realm ofdiscretion of the Court. It must also be noted here that the inordinatedelay of up to 17 years in making refunds was a special circumstancewhen this Court was persuaded to accept grant of interest at the rate of9 per cent per annum in Sandvik Asia Ltd.[5] Even while doing so, theobservations made by this Court in Paragraph 48 of the decision arequite clear that “the award of interest in refund and amount must be asper the statutory provisions of law and whenever a specific provisionhas been made under the statute such provision has to govern the field.”The subsequent decision of the bench of three Judges in Gujarat FluoroChemicals[6]noticed that the grant of interest at the rate of 9 per centwas in the facts of the case in Sandvik Asia Ltd.[5]

19. Since the delay in the instant case was in the region of 94 to290 days and not so inordinate as was the case in Sandvik Asia Ltd.[5],the matter has to be seen purely in the light of the concerned statutoryprovisions. In terms of the principal part of Section 56 of the CGST Act,the interest would be awarded at the rate of 6 per cent. The award ofinterest at 9 per cent would be attracted only if the matter was coveredby the proviso to the said Section 56. The High Court was in error inawarding interest at the rate exceeding 6 per cent in the instant matters.

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A20. We, therefore, allow these appeals and direct that the originalwrit petitioners would be entitled to interest at the rate of 6 per cent perannum on amounts that they were entitled by way of refund of tax.Since the concerned amounts along with interest at the rate of 6 percent per annum have already been made over to them, nothing furtherneed be done in both the cases.

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21. The instant Civil Appeals are thus allowed to the extent indicatedabove without any order as to costs.

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Ankit Gyan

(Assisted by : Preetam Bharti)

Appeals allowed.

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