Facts of the Case

The petitioner, M/S Desai Brothers Limited, an ex-UP dealer, was transporting beedi from West Bengal to Haryana through Uttar Pradesh as a transit state when its consignment was detained on 22.02.2018 on allegations of improper documentation and smuggling, and subsequently seized. Proceedings under Section 20 of the IGST Act read with Section 129(3) of the UP GST Act, 2017 led to a demand of Rs. 23,66,020/- as tax and an equal penalty, totalling Rs. 47,32,040/-. The petitioner furnished a bank guarantee for this amount on 15.03.2018, which was encashed by the department on the very same day, before the petitioner could avail any appellate remedy. The petitioner's First Appeal (GST-67 of 2018) against the underlying order dated 09.03.2018 was allowed on 18.03.2019, directing refund of the entire Rs. 47,32,040/-, and this appellate order was never challenged by the State. Despite this, more than four years passed without the refund being processed, the department taking the position that refund could be granted only upon an online application in Form RFD-01, which the petitioner had allegedly not filed.

Issues Involved

  1. Whether the petitioner's offline/manual refund application, filed within the statutory two-year period, could substitute for an online application under Rule 97-A of the UP GST Rules, 2017.
  2. Whether the department was liable to pay statutory interest on the delayed refund under Section 56 of the UP GST Act.

Petitioner's Arguments

  • The petitioner was prevented from moving an online refund application owing to technical glitches on the GSTN portal, and had accordingly filed a physical/offline application on 02.04.2019, well within the two-year period prescribed under Section 54(1), with further follow-up applications on 15.04.2019, 29.05.2019 and 04.07.2019 that remained unattended.
  • Rule 97-A of the UP GST Rules expressly permits manual filing wherever the Rules reference electronic filing, as held by a co-ordinate Bench in Savista Global Solutions Pvt. Ltd. v. Union of India (Writ Tax No. 113 of 2021); reliance was also placed on M/S Alok Traders v. Commissioner Commercial Taxes, 2022 UPTC [111] 845, to argue that the respondents were exposed to interest liability for the delay.

Respondent's Arguments

  • Since the primary scheme of the Act contemplated refund applications through the online mode, the delay was attributable to the petitioner's failure to file an online application despite communications sent to it in that regard.

Court Order / Findings

  • The Court held that the primary facts were not in dispute: the appellate order dated 18.03.2019 had long attained finality and clearly directed refund of Rs. 47,32,040/-, so the amount could not be retained by the State as a matter of right, subject only to procedural compliance.
  • Relying on Rule 97-A of the UP GST Rules and the reasoning in Savista Global Solutions, the Court held that the petitioner's offline application dated 02.04.2019 was validly filed within the statutory two-year period, obligating the revenue authorities to dispose of it within 60 days under Section 54(7), failing which interest liability at the statutory rate under Section 56 was attracted from the end of that 60-day period.
  • The Court issued a writ of mandamus directing the department to dispose of the petitioner's refund claim and pay the refund amount together with statutory interest, within three months from the date of the order.

Important Clarification

Rule 97-A of the UP GST Rules permits manual/offline filing of a refund application wherever the Rules otherwise contemplate electronic filing, and a departmental circular preferring the online mode cannot override this Rule; an offline refund application filed within the statutory two-year period under Section 54(1) is validly filed, and the department's failure to dispose of it within 60 days attracts statutory interest under Section 56, regardless of its preference for online processing.

Sections Involved

  • Section 129(3) of the UP GST Act, 2017 – governs determination of tax and penalty following detention/seizure of goods in transit.
  • Section 54(1) and (7) of the UP GST Act, 2017 – prescribe the two-year limitation for filing a refund application and the 60-day period for its disposal.
  • Section 56 of the UP GST Act, 2017 – provides for statutory interest (at 6% p.a.) on delayed refunds beyond the 60-day period.
  • Rule 97-A of the UP GST Rules, 2017 – permits manual filing of applications, replies, and other documents wherever the Rules reference electronic filing.

Decision – In Favour of

The decision was in favour of the Assessee, with a mandamus issued directing refund of Rs. 47,32,040/- together with statutory interest within three months.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case Number: WRIT TAX No. - 954 of 2019
  • Neutral Citation: 2023:AHC:162034-DB
  • Coram: Hon'ble Saumitra Dayal Singh, J. and Hon'ble Vinod Diwakar, J.
  • Date of Order: 10 August 2023

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