Nayara Energy Limited vs. Union Of INDIA

Held

The Court acknowledged that the respondents did not dispute the substantive part of the petitioner's claim, agreeing to credit the refund amount of Rs. 50,88,42,582/- to the petitioner and Rs. 39,05,121/- to the Consumer Welfare Fund. The primary reason for non-payment was identified as a technical glitch in the software. The Court noted that the refund order was passed on August 5, 2020, and circulars and Section 56 of the CGST Act mandate payment of interest if refunds are not processed within 60 days. The Court granted four weeks to resolve the technical issue, suggesting outsourcing if necessary. If the issue was not resolved within this period, the respondents were directed to pay the refund amount to the petitioner without fail, along with interest. Crucially, if the payment was not made within four weeks, the rate of interest was enhanced to 12% on the entire sum from the due date of payment until the actual date of payment. The Court also suggested considering advancing the Consumer Welfare Fund amount from the petitioner as a potential interim solution. The petition was disposed of with these directions.

Facts

The petitioner, Nayara Energy Limited, filed a writ petition before the Gujarat High Court seeking a writ of Mandamus to direct the respondents to disburse a sanctioned refund of Rs. 50,88,42,582/- and applicable interest under Section 56 of the CGST Act. The refund was sanctioned on August 5, 2020, by the Deputy Commissioner of Central GST, Division-2, based on a previous High Court judgment. Despite the sanction, the amount remained undisbursed for over a year, with no response from the authorities to the petitioner's communications. The respondents, in their affidavit, attributed the delay to a technical glitch in the software system, which prevented the bifurcation of the refund amount to be credited to the petitioner and the Consumer Welfare Fund (Rs. 39,05,121/-). Efforts to resolve this issue with higher authorities and the Directorate General of Systems were ongoing but had not yielded a solution.

Key Issues

1. Whether the respondents' inaction in disbursing the sanctioned refund amount of Rs. 50,88,42,582/- to the petitioner, despite the sanction order dated August 5, 2020, is arbitrary and violative of the petitioner's rights, particularly in light of Section 56 of the CGST Act concerning interest on delayed refunds. (Question of law and fact, turning on Section 56 of the CGST Act). Petitioner's Arguments: - The respondents have failed to disburse the sanctioned refund amount for over a year, causing hardship. - The delay is attributable to the respondents' internal technical issues, for which the petitioner should not suffer. - Interest on the delayed refund is also due as per Section 56 of the CGST Act. Respondents' Arguments: - The delay in disbursement is solely due to a technical limitation in the software system, preventing the bifurcation of the refund amount for crediting to the petitioner and the Consumer Welfare Fund. - The issue has been escalated to higher authorities and the Directorate General of Systems for resolution. - The refund amount has not been withheld but is pending due to the system's inability to process the split payment.