The Madras High Court made an important decision in the case of Razack Trading Company, stating that interest is payable on erroneous GST-ITC refund where ITC was wrongly availed. The petitioner wrongly claimed ITC on Basic Customs Duty paid during the pre-GST period, and then claimed a refund for it. The Department sanctioned the refund but later directed the petitioner to pay it back along with interest and penalty. The Court interpreted the provision under Section 73 and 74 of the GST laws and concluded that restitution is provided for erroneous refund. However, some disagree with this decision from a GST law standpoint, arguing that interest cannot be levied without specific imposition under any tax law. They also point out that the expression used in Section 73 & 74 does not denote the levy of interest. There is a suggestion that the Court may not have reflected on the angle of ‘Restitution under the common law’ in the order.
Source Gaba & Co
