Hon'ble High Court directed GST Authority to refund GST paid under wrong head

The Hon'ble Punjab and Haryana High Court ("Punjab and Haryana HC") in the matter of SBI Cards & Payment Services Limited v. Union of India and others [CWP-8108-2021 (O&M) dated October 08, 2021], directed the Authority to refund GST worth Rs. 108 crores paid under the wrong head along with applicable interest as the money was lain with the Authority for the past two and a half years.

SBI Cards & Payment Services Limited ("the Petitioner") by this petition has challenged the order dated February 19, 2021 issued by Additional Commissioner (Appeals) whereby the prayer for a refund of Central Goods and Services Tax ("CGST") & State Goods and Services Tax ("SGST") amounting to Rs. 108 crores approximately wrongly paid on April 05, 2019 (for the disputed period i.e. from April 2018 to December 2018) in excess of the tax due under Section 77 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") has been declined.

Factually, the Petitioner is a joint venture with the State Bank of India ("SBI") wherein SBI holds 69.39% shares and the Petitioner is engaged in the business of issuing credit cards to its customers (cardholder) and is duly registered with the Reserve Bank of India under Section 451A of the Reserve Bank of India, Act 1934 as a non-deposit taking and non-banking financial company.

During the initial stage of the GST regime the complete break up of individual transactions was not available to the Petitioner and in the absence thereof for the period April 2018 to December 2018 the Petitioner paid CGST and SGST of about Rs. 108 crores approximately considering the transactions to be intra-state sales. It later transpired that those transactions for which the amount of Rs. 108 crores approximately had been paid as on the basis of them intra-state sales were actually inter-state transactions. It was in those circumstances that the Petitioner applied for refund of the amount wrongly paid on the basis that these transactions were intra-state transactions. At that stage the Department required it to first make the payment under the right head Integrated Goods and Services Tax ("IGST") and then the prayer for refund would be considered. The Petitioner hence deposited another amount of Rs. 108 cores approximately as tax which was due on the inter-state transactions. Even then its plea for refund was rejected.

The Hon'ble Haryana and Punjab High Court opined that in a normal case this may have been an appropriate order to pass but in the present case it cannot be lost sight of that there is no dispute about the amount of tax, rather it was on the requirement of the Department that the Petitioner paid an additional amount of Rs.108 crores approximately. Had this amount not been paid, of course, what the Department is arguing would have been applicable but once the Petitioner paid that extra amount on asking of the Department under the IGST the liability of the Department to refund an amount of Rs. 108 crores wrongly deposited under CGST & SGST cannot be disputed.

Further, the Court said that the money has now lain with the Department for the past two and a half years and resultantly directed to fund Rs. 108 crores approximately which was deposited earlier by the Petitioner towards CGST and SGST along with applicable interest within a period of one month.