What is the correct journal entry when entering interest/penalty on GST/HST returns?

Interest on late GST-HST are not considered fines or penalties, which are non-deductible for income tax. However, the Income Tax Act disallows deducting penalty interest for GST-HST. For Corporations the non-deductible amount is added back to income on Schedule 1 of the T2 tax return. 

If it isn't recorded as an expense how do I make this adjustment to the refund that I was owed

Penalties and Interest are to be recorded totally separately from your HST Payable account and should not affect it in anyway. Do not deduct any penalties or interest from the refund owed to you. When you get the refund cheque, which will have subtracted from it any penalties and interest you owed, enter the full refund amount to deposit in your "Bank" account, or whatever you named it, as shown in your QuickBooks Customers > Receive Payments window with "Receiver General - Receivables" as the customer selected. Then enter a payment from your QuickBooks "Bank" account for the difference of the amount owed to you and the amount received, to the expense account you should have first set up, called for example, "HST Penalties & Interest", with the payee "Receiver General". That way the net amount entered in your QuickBooks "Bank" account will match the amount you actually deposited in your real bank account. I hope that helps.

Is the payment to the expense account done in the cheque register?

Yes

I got it entered, thanks so much for your help!