Hon’ble High Court ordered the GST Authority to reimburse GST paid under the incorrect heading

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

By this petition, SBI Cards & Payment Services Limited (“the Petitioner”) has challenged the order dated February 19, 2021 issued by Additional Commissioner (Appeals) in which the prayer for a refund of Central Goods and Services Tax (“CGST”) and State Goods and Services Tax (“SGST”) amounting to approximately Rs. 108 crores 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.

In fact, the Petitioner is a joint venture with the State Bank of India (“SBI”) in which SBI owns 69.39 percent of the shares, and the Petitioner is in the business of issuing credit cards to its customers (cardholders) and is duly registered with the Reserve Bank of India as a non-deposit taking and non-banking financial company under Section 451A of the Reserve Bank of India Act 1934.

During the early stage of the GST regime, the Petitioner did not have access to a complete breakdown of individual transactions, and as a result, from April 2018 to December 2018, the Petitioner paid CGST and SGST of roughly Rs. 108 crores, assuming the transactions to be intra-state sales. It was then discovered that the transactions for which about Rs. 108 crores had been paid as intra-state sales were actually inter-state transactions. In those situations, the Petitioner sought a reimbursement of the sum incorrectly paid on the grounds that these were intra-state transactions. At the time, the Department required it to make the payment under the correct heading, Integrated Goods and Services Tax (“IGST”), before the refund request would be processed. As a result, the Petitioner deposited an additional amount of roughly Rs. 108 cores as tax on inter-state transactions. Even then, its request for a reimbursement was denied.

The Hon’ble Haryana and Punjab High Court opined that in a normal case, this would have been an appropriate order to pass, but in the present case, it cannot be overlooked that there is no dispute over the amount of tax, rather it was on the Department’s request that the Petitioner paid an additional amount of approximately Rs.108 crores. Of course, if this amount had not been paid, what the Department is arguing would have been applicable; however, because the Petitioner paid that extra amount on the Department’s request under the IGST, the Department’s liability to refund an amount of Rs. 108 crores wrongfully deposited under CGST and SGST cannot be disputed.

Furthermore, the Court stated that the money has now been with the Department for the past two and a half years and directed that Rs. 108 crores be deposited earlier by the Petitioner towards CGST and SGST along with appropriate interest within one month.

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