The Karnataka HC on 10.11.22 passed a judgement under Justice S.R. Krishna Kumar in AI Tisource Business Solutions Pvt. Ltd. Versus Deputy Commissioner of Central Tax (Writ Petition No. 459 of 2022) and held that the interest on tax refund payable on expiry of 3 months from the date of refund application.
The petitioner filed refund claims, which were sanctioned in favour of the 3 petitioner during the period from 28.03.2018 to 19.05.2020, respectively. It is contended that in view of the inordinate delay and latches on the part of the respondent in not processing the refund claims of the petitioner within the prescribed period of three months from the date of receipt of the applications of the petitioner as contemplated under Section 11-BB. The petitioner submitted representation seeking payment of interest. The respondent contended that there were certain discrepancies and lacunae in the same on account of which the respondent called upon the petitioner to furnish the details and documents and also make submissions in this regard and ultimately, pursuant to the petitioner making submissions the respondent sanctioned the refund within the prescribed period of three months from the date of final submission of the petitioner and as such, there was no delay on the part of the respondent in sanctioning the refund and consequently, respondent was not liable to pay interest as sought for by the petitioner in the present petition the respondent would be liable to pay interest in favour of the petitioner on the amounts ordered to be refunded in favour of the petitioner. The issue raised was whether the payment of interest on delayed refunds was sanctioned beyond the prescribed period of three months from the date of receipt of an application for a refund or from the date of the order for a refund.
The court referred to SC’s judgement in Ranbaxy Laboratories Ltd. Vs. Union of India which held that the interest on a delayed refund under section 11BB is payable three months after the date of receipt of the application. It is an undisputed fact that the respondent did not pass the refund sanction order within the prescribed period of three months and the delay on the part of the respondent in not passing the refund sanction order cannot be attributed or attributable to the petitioner, mainly when the adjudicatory process had to be mandatorily completed within the period of three months. It is significant to note that merely because there were certain deficiencies or lacunae in the refund claim by the petitioner, the said circumstance cannot be relied upon nor made the basis by the respondent in order to contend that it was entitled to pass the refund sanction order beyond the prescribed statutory period of three months. Under these circumstances, “I am of the considered opinion that the respondent completely misdirected itself in coming to the erroneous conclusion that the period of three months would start running from the date of the final submission made by the petitioner and not from the date of submission of the refund claim and this finding, which is not only contrary to the provisions of Section 11-B and 11-BB of the said Act of 1944”
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JUDGEMENT REVIEWED BY VAISHNAVI SINGH