M/S Kota Dall Mill Thro Its Authorized Signatory Mr Akash Kumar vs. The State Of Jharkhand Through The Secretary Cum Commissioner Of Commercial Taxes

Facts

M/s Kota Dall Mill (the petitioner) sought a direction for payment of differential interest amounting to Rs. 51,70,576/- on a principal refund of Rs. 3,54,21,551/-. The principal amount was refunded on March 21, 2023, after a delay of 916 days from the refund application filed on September 16, 2020. The petitioner was engaged in the manufacture and supply of Supplementary Nutrition Food and was registered under the Jharkhand Value Added Tax Act, 2008. An initial assessment order dated April 25, 2019, was set aside and remanded. A fresh assessment order dated June 4, 2020, led to a revised excess demand notice on July 27, 2020, for Rs. 3,54,21,551/-. After the principal refund, the petitioner claimed interest, which was partially paid. The current writ petition challenges the non-payment of the remaining interest.

Held

The Court held that the petitioner is entitled to interest on the delayed refund of Rs. 3,54,21,551/-. The Court rejected the revenue's contention that the interest calculation period should exclude March 15, 2020, to February 28, 2022, finding it untenable. The Court reasoned that the Supreme Court's order in Suo Moto Writ Petition (C) No. 3 of 2020 was for the limitation period for instituting quasi-judicial proceedings, not for refund applications. The Court also referred to Circular No. 157/13/2021-GST, which clarified that tax authorities could continue to dispose of refund applications during the specified period. Applying the principle that interest is the normal accretion to capital, the Court held the petitioner entitled to interest at 9% per annum. The total interest due was calculated as Rs. 72,14,351/- for the period from December 16, 2020, to March 20, 2023 (826 days). The Respondent Department was directed to pay the differential amount of interest, which is Rs. 51,70,576/-, after deducting the Rs. 20,43,775/- already paid, within 10 weeks.

Key Issues

1. Whether the petitioner is entitled to interest on the delayed refund of Rs. 3,54,21,551/-, and if so, at what rate and for what period? The petitioner argued that they are entitled to interest as the principal amount was refunded with significant delay, and interest is a normal accretion to capital, not a penalty, citing Alok Shanker Pandey. They claimed interest at 9% per annum on the delayed refund. The petitioner contended that the revenue's argument of excluding the period from March 15, 2020, to February 28, 2022, based on the Supreme Court's Suo Moto Writ Petition (C) No. 3 of 2020, is misconceived as it pertains to instituting proceedings, not refund applications. The revenue argued that interest should be calculated from the date of the online refund application for interest, which was March 4, 2024, and that the period from March 15, 2020, to February 28, 2022, should be excluded due to the Supreme Court's order.