Facts of the Case

The petitioner, Bansal International, engaged in export of goods, filed a refund application dated 06.02.2020 claiming Input Tax Credit (ITC) refund for exports made without payment of tax. The refund was partially rejected by the Adjudicating Authority on 10.11.2020.

Aggrieved, the petitioner filed an appeal, and the Appellate Authority allowed the refund claim, directing reprocessing. Subsequently, the refund was granted but interest on delayed refund was denied.

The petitioner then filed a claim for interest amounting to ₹13,12,761/-, which was rejected by the impugned order dated 11.07.2023. The present writ petition challenges denial of interest on delayed refund.

Issues Involved

  1. Whether interest under Section 56 of the CGST/DGST Act is payable:
    • From 60 days after the initial refund application, or
    • From 60 days after the subsequent application filed pursuant to appellate order
  2. Whether denial of interest is justified when refund is granted after appellate proceedings.

Petitioner’s Arguments

  • The petitioner contended that interest should be calculated from the date immediately after 60 days of the original refund application, not from the subsequent application.
  • It was argued that appellate proceedings are a continuation of original proceedings.
  • The petitioner emphasized that delay caused due to wrongful rejection by authorities cannot defeat the statutory right to interest.
  • Section 56 must be interpreted to ensure compensation for wrongful retention of funds.

Respondent’s Arguments

  • The Revenue argued that interest is payable only as per strict statutory interpretation.
  • It was contended that:
    • A fresh application is required after appellate order, and
    • Interest should run only after 60 days from such subsequent application.
  • Reliance was placed on Rule 89(2) of CGST Rules and proviso to Section 56.

Court Findings / Order

The Delhi High Court allowed the petition and held:

  • Interest under Section 56 is payable from the date immediately after expiry of 60 days from the initial refund application, provided it was complete in all respects.
  • The Court rejected the Revenue’s interpretation that interest begins only after a fresh application post-appeal.
  • It clarified that:
    • Appellate proceedings are a continuation of original proceedings.
    • A taxpayer’s right to interest cannot be defeated due to erroneous rejection by authorities.
  • The impugned order denying interest was set aside, and authorities were directed to process the interest claim accordingly. 

Important Clarification by Court

  • Section 56 operates in two parts:
    1. 6% Interest → From 60 days after original application
    2. 9% Interest (Proviso) → From 60 days after application filed post-final appellate order
  • The proviso does not override the main provision but only enhances interest for delayed compliance after final adjudication.
  • Filing of a second application is merely procedural and does not reset limitation or interest calculation.

Sections Involved

  • Section 54 – Refund of Tax
  • Section 56 – Interest on Delayed Refund
  • Section 107 – Appeals to Appellate Authority
  • Section 112 & 117 – Appellate Remedies
  • Rule 89 & Rule 90 – CGST Rules, 2017

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB21112023CW116292023_110115.pdf

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