SBI Cards And Payment Services Limited VS Union Of India

The Goods and Services Tax (GST) system in India comprises the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST). On April 5, 2019, the petitioner erroneously paid approximately Rs. 108.41 crores in CGST and SGST for the period from April 2018 to December 2018. This payment was in excess of the tax due under Section 77 of the Act.

During this period, the petitioner initially operated under a single Service Tax Registration Number, which carried over into the new GST regime. Subsequently, the petitioner obtained separate Registration Numbers for each of the 28 States. However, the petitioner lacked a complete breakdown of all notified transactions for the period from April 2018 to December 2018. Consequently, the petitioner incorrectly classified transactions as intra-State sales and paid CGST and SGST amounting to Rs. 108 crores, treating these transactions as Business to Customer (B2C) supplies due to the unknown GST registration of the acquiring banks.

It was later discovered that the transactions, for which the petitioner had paid Rs. 108 crores, were actually inter-State transactions. As a result, the petitioner applied for a refund of the wrongly paid amount. However, the refund application was initially rejected by the concerned authorities on February 19, 2021.

The petitioner then filed CWP No. 8108 of 2021, which was allowed on October 8, 2021. The court directed the respondents to refund the amount of Rs. 108 crores along with applicable interest within one month. Subsequently, on December 22, 2021, respondent No. 2 passed an order (Annexure P-1) concerning the petitioner’s claim for interest amounting to Rs. 15,68,26,554 on the Rs. 108.41 crores as of October 31, 2021.

In this case, a petitioner mistakenly paid Rs. 108.41 crores in Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) on April 5, 2019, for the period of April 2018 to December 2018 under the incorrect assumption that the transactions were intra-State sales when they were actually inter-State transactions

The petitioner initially had one Registration Number for Service Tax, which continued under the new GST regime before obtaining separate Registration Numbers in all 28 States. Due to the lack of complete transaction data from April 2018 to December 2018, the petitioner reported and paid CGST and SGST amounting to approximately Rs. 108 crores, treating the transactions as intra-State. These transactions were reported under GSTR1 and 3-B as Business to Customer (B2C) supplies because the GST registration details of the acquiring banks were unknown at that time

It was later discovered that the transactions were inter-State, not intra-State. The petitioner applied for a refund based on this new information, but the authorities rejected the refund request on February 19, 2021. The petitioner then filed CWP No. 8108 of 2021, which was allowed on October 8, 2021. The court directed the respondents to refund the amount of Rs. 108 crores along with applicable interest within one month. Despite the court order, the respondent rejected the claim for interest amounting to Rs. 15,68,26,554 as of October 31, 2021

The petitioner argued that the rejection of interest was an arbitrary interpretation of Section 56 of the Central Goods and Services Tax Act, 2017. According to Section 56, an assessee is entitled to receive interest after 60 days from the date of filing the refund application until the amount is credited. The petitioner contended that they paid Rs. 108.41 crores as directed by the GST Department, which was retained for 2.5 years before being refunded by court order, yet the claim for interest was denied without a valid explanation. The petitioner also referenced Section 54 of the Act, which allows a person to claim a refund of tax or interest paid if conditions specified under the section are met

The Department argued that the 60-day period for calculating interest liability should be reckoned from October 28, 2021, the date the petitioner filed an online refund application for the interest amount

The petitioner has filed a writ petition challenging the rejection of the interest claim, seeking relief as per the provisions of the GST Act.

The Goods and Services Tax (GST) regime, which came into effect prior to April 2018, requires businesses to pay the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST) for intra-state sales. However, for the period from April 2018 to December 2018, a petitioner wrongly paid CGST and SGST amounting to approximately Rs. 108.41 crores, treating the transactions as intra-state sales. This error occurred because the petitioner did not have the complete break-up of all notified transactions during this initial stage and was unaware of the GST registration of the acquiring banks. Consequently, the petitioner reported these transactions under GSTR-1 and GSTR-3B as Business to Customer (B2C) supplies.

Later, it was discovered that these transactions were actually inter-state transactions, which should have been subject to the Integrated Goods and Services Tax (IGST) instead of CGST and SGST. Upon realizing this mistake, the petitioner applied for a refund of the wrongly paid amount. However, the refund application was rejected by the concerned authorities on 19th February 2021. The petitioner then filed Civil Writ Petition (CWP) No. 8108 of 2021, which was allowed by the court on 8th October 2021. The court directed the respondents to refund the amount of Rs. 108.41 crores, along with applicable interest, within one month.

Despite the court order, the respondents rejected the petitioner’s claim for interest amounting to Rs. 15,68,26,554 (as of 31st October 2021) on the refunded amount through an order dated 22nd December 2021. Aggrieved by this decision, the petitioner filed the present writ petition.

The petitioner’s counsel argued that the court’s judgment dated 8th October 2021 clearly allowed for the refund along with applicable interest. However, the respondent-department disallowed the interest by arbitrarily interpreting Section 56 of the Central Goods and Services Tax Act, 2017. According to the petitioner’s counsel, the petitioner is entitled to receive interest after the expiry of 60 days from the date of filing the application for a refund until the refund amount is credited to its account. The petitioner filed the original refund application on 5th April 2019, and the interest should be calculated from that date, as per Section 56 of the Act. Furthermore, the petitioner had to file a fresh application because the Online GST portal does not permit the refund of both the principal amount and the interest without a new application.

In support of their argument, the petitioner’s counsel cited the judgment of the Supreme Court in Ranbaxy Laboratories Ltd. Vs. Union of India and others (2011) and a decision by this court in M/s Dee Kay Exports Vs. Union of India and others, CWP No. 26707 of 2018. These cases established that interest is payable from the date of the original application if the refund is delayed beyond the stipulated period.

Conversely, the respondents’ counsel contended that, according to Section 56 of the Act, the period of 60 days for calculating interest liability should be counted from 28th October 2021, the date on which the petitioner filed an online refund application for interest. They argued that the interest calculation should start from this later date, not from the original application date of 5th April 2019.

The respondents’ interpretation of Section 56 was challenged by the petitioner’s counsel, who maintained that the interest should be reckoned from the expiry of 60 days after the original application date. They emphasized that the petitioner had no option but to file a fresh application due to the limitations of the GST portal and that the respondents’ refusal to pay interest from the original application date was unjustified.

In conclusion, the petitioner seeks the court’s intervention to ensure the refund of the interest amount in addition to the principal sum of Rs. 108.41 crores, arguing that the interest should be calculated from the date of the original refund application as per the relevant provisions of the Central Goods and Services Tax Act, 2017.

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