2026-VIL-1215-P&H
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SGST High Court Cases

GST – Validity of Paragraph 4.6 of the Circular No. 197/09/2023 GST dated 17.07.2023, Refund of interest paid under Rule 96A of the CGST Rules, 2017 on delayed realisation of export proceeds where the tax so paid is refunded - Petitioner could not realise the export consideration in convertible foreign exchange within one year and deposited tax with interest under Section 50 as required by Rule 96A(1)(b) - When the consideration was realised later, the refund of tax was allowed but the refund of interest was rejected - Appellate Authority affirmed the rejection relying on paragraph 4.6 of the Circular dated 17.07.2023, which provides that no refund of interest paid in compliance of Rule 96A(1) is admissible - Whether interest paid under Rule 96A can be retained by the Revenue solely on the strength of paragraph 4.6 of the Circular after the tax deposited has been refunded upon subsequent realisation of export proceeds - HELD - Section 54(1) expressly contemplates refund not only of tax but also of interest paid on such tax and any other amount paid. Rule 96A requires payment of tax with interest on failure to realise proceeds, but does not provide the consequence where proceeds are realised later and the tax is refunded, and does not provide that the interest shall be retained, the restriction being found only in paragraph 4.6 of the Circular. Having accepted subsequent realisation and refunded the tax, the Revenue cannot justify retention of interest merely by relying on the Circular in the absence of independent statutory basis. A Circular may clarify the manner of administering a provision but cannot override or alter the statute - Interest is compensatory and ordinarily follows the principal amount, and the contention that subsequent realisation cannot undo the default is not accepted – Further, the Rule 96B operates in a different field of recovery of refund already granted on export of goods and its silence on interest cannot be imported into Rule 96A or restrict Section 54(1) - Paragraph 4.6 of the Circular is declared bad in law and quashed to the extent that it denies refund of interest paid under Rule 96A(1) where the tax is subsequently refunded upon realisation of export proceeds - The order of the Appellate Authority rejecting refund of interest is set aside, the Respondents are directed to refund the interest corresponding to the tax already refunded - The writ petition is allowed.
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