A Division Bench of the Delhi High Court composed of Justice Vibhu Bakhru and Justice Amit Mahajan ruled that interest on delayed Goods and Services Tax (GST) refunds should be calculated from the expiration of 60 days after the refund application, not from the date of the appellate order, despite the initial denial. The petitioner contested the order dated 11.07.2023 from the Additional Commissioner of the Department of Trade and Taxes, rejecting the claim for ₹13,12,761 interest on refunded GST at a 9% annual rate.
The Adjudicating Authority, citing Section 56 of the Delhi Goods and Services Tax Act, 2017 (‘DGST Act’), clarified that interest is payable only if the refund isn’t processed within sixty days from the application post the Appellate Authority’s order. Since the refund in this case was processed within sixty days, no interest was deemed payable under Section 56 of the DGST Act.
The petitioner argued that the Adjudicating Authority misinterpreted Section 56, claiming entitlement to interest after sixty days from the initial refund application, not from the subsequent application after succeeding in the refund claim. The main issue addressed was whether interest under Section 56 of the DGST Act starts from the date immediately after sixty days from the refund application or from a later date if the refund is initially denied but later allowed.
The bench noted that the petitioner’s entitlement to interest should not be defeated due to an incorrect order rectified in appellate proceedings, emphasising that appellate proceedings are a continuation of the original ones.
The counsel for Revenue contended that interest should strictly adhere to statutory provisions and not be granted based on equity. The court clarified that Section 56 of the CGST Act specifies interest rates on unpaid refunds after sixty days and an increased rate after sixty days from the application filed post the refund claim’s appellate finality.
The court emphasized that applications for refund after Appellate Authority orders does not require fresh adjudication but serve to implement existing orders. Consequently, the court set aside the impugned order and directed the Adjudicating Authority to process the petitioner’s refund application filed on 16.05.2023.