Bombay High Court Rules: IGST Refund Interest Claims Cannot Be Dismissed on Jurisdictional Grounds Alone
Background of the Case
The matter of Gulabdas International Trading LLP Vs Union of India came before the Bombay High Court through a writ petition challenging the manner in which interest claims on delayed IGST refunds were handled by appellate authorities. The core issue revolved around the rejection of such claims purely on jurisdictional considerations, without examining the substantive merits.
The petitioner firm had sought relief concerning two distinct matters related to export incentives. In September 2020, the firm submitted two separate claim applications before the customs authorities. The first application, submitted on 18 September 2020, pertained to interest accrued on delayed IGST refund payments governed by the IGST Act. The second application, filed on 23 September 2020, related to interest on delayed drawback payments falling under the Customs Act.
Journey Through the Appellate Hierarchy
The original adjudicating authority, being Respondent No.5 in the proceedings, rejected both applications through a consolidated order issued on 1 December 2020. Dissatisfied with this decision, the petitioner exercised its right to appeal before Respondent No.3, who served as the first appellate authority under the customs framework.
Unfortunately, the first appellate authority also turned down both claims through a unified order dated 31 March 2022, thereby upholding the original decision. Not deterred by this setback, the petitioner escalated the matter to the revisional authority, designated as Respondent No.2.
The Revisional Authority's Split Decision
On 13 September 2023, the revisional authority passed an order that partially favored the petitioner. The authority accepted the claim for interest on delayed drawback under the Customs Act, thereby granting relief on that front. However, the claim concerning interest on delayed IGST refund met with a different fate.
The revisional authority declined to adjudicate the IGST refund interest claim, citing lack of competence. The reasoning provided was that customs appellate authorities lack jurisdiction to determine matters arising under GST legislation. Specifically, the authority observed that revision proceedings conducted under Section 35EE of the Central Excise Act, 1944 cannot encompass issues governed by the CGST Act, 2017.
In paragraph 8 of the contested order, the revisional authority articulated its position thus:
"As regards to the issue of interest on IGST refund, Government notes that present proceedings are in exercise of the powers vested in terms of Section 35EE of the Central Excise Act, 1944 and must be exercised within the framework of the Central Excise Act, 1944. The Provisions of the CGST Act, 2017 are not exercisable in revision proceedings. In the result, the revision applications filed by the Applicant to the extent of the issue of interest on IGST refund are not maintainable under Section 35EE of the Central Excise Act, 1944."
This jurisdictional objection formed the basis for refusing to examine the IGST refund interest claim on its merits.
The Writ Petition Before Bombay High Court
The petitioner approached the Bombay High Court specifically challenging the rejection of the IGST refund interest claim. The scope of the writ petition was deliberately restricted to this particular aspect, as the drawback interest matter had already been favorably resolved.
During the hearing, the Court permitted amendment to the prayer clause, which was to be executed immediately without requiring re-verification. With mutual consent from both parties' counsel, the Rule was made returnable forthwith.