The Bombay High Court has ruled that the Department is legally required under Section 56 of the CGST Act to pay interest on delayed IGST refunds, even if the delay was due to administrative verification or investigations that were later nullified. The case involved Shri. Charan Singh Surjit Singh Gujral, a proprietor exporting motor parts and mobile accessories, who had filed for IGST refunds through shipping bills between December 2018 and January 2019.
The Special Intelligence and Investigation Branch had seized his goods, alleging value mis-declaration, and imposed penalties. However, this order was overturned by the Commissioner of Customs (Appeals) and upheld by the Tribunal in December 2021. Despite eventually receiving his goods and principal refund after filing a petition in 2025, the Department refused to pay interest on the delayed refund.
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The Court found that under Sections 54 and 56 of the CGST Act, refunds must be processed within 60 days, and any delay mandates the payment of interest. The judges criticized the Department's defense that the delay was due to a "bona fide administrative process," noting that the investigation had already been deemed flawed. Emphasizing the importance of refunds for an exporter's working capital and business ease, the Court ordered the Department to pay the interest within four weeks, as the refund was valid and the shipping bills served as a formal application.
Order Date - 15 April 2026
Parties: Shri. Charan Singh Surjit Singh Gujral (Proprietor of Guru Nanak Motor House) vs. Union of India & Ors.
Facts -
- Shri. Charan Singh Surjit Singh Gujral, exporting motor parts and mobile accessories, paid IGST on goods and filed 30 shipping bills (which double as refund applications) between December 2018 and January 2019.
- The Special Intelligence and Investigation Branch (SIIB) seized the goods mid-export, alleging value mis-declaration, and issued an "Order-in-Original" that confiscated the goods and slapped the Petitioner with heavy penalties and reduced drawbacks.
- The Petitioner fought back, and the Commissioner of Customs (Appeals) scrapped the initial order, calling the investigation "haphazard" and "botched," a decision later upheld by the Tribunal in December 2021.
- Despite winning his case and finally getting his goods and the principal refund amount after filing this petition in 2025, the Department refused to pay any interest on the multi-year delay, leading the court to step in.
Issue -
- Whether the Petitioner is entitled to interest on delayed IGST refunds under Section 56 of the CGST Act when the refund was withheld due to a departmental investigation?
Order -
- The Court noted that Sections 54 and 56 of the CGST Act create a mandatory timeline where refunds must be processed within 60 days; any delay beyond this period automatically triggers a liability for the State to pay interest.
- Judges expressed "astonishment" at the Department’s mechanical defense, which tried to argue that interest wasn't payable because the delay was part of a "bona fide administrative process," effectively ignoring that their investigation had already been quashed.
- The Court emphasized that refunds are critical for an exporter's working capital and "ease of doing business," meaning the Department cannot use its own procedural delays or flawed investigations as an excuse to withhold interest.
- The Bench ruled that since the Petitioner’s refund was valid and the assessment of shipping bills counts as a formal application, the Department must comply with Section 56 and pay the interest within four weeks.
