The Delhi High Court addressed a case involving Ernst & Young Ltd. (E&Y) and the Assistant Commissioner regarding interest on delayed GST refunds for the financial years 2017-18 to 2021-22. E&Y claimed interest liability of approximately ₹28.4 lakhs, applying interest rates of 6% and 9% as per Section 56 of the CGST Act. The Revenue opposed this claim, attributing the delay to deficiencies in the refund applications and suggested a remand for recalculation based on precedent cases.
The court had to determine whether E&Y was entitled to interest on the delayed refunds and the appropriate interest rate and timeline. The court confirmed that interest is a statutory right under Section 56 and must adhere to prescribed timelines. Specifically, a 6% interest rate applies if the refund is not granted within 60 days from the initial application date, while a 9% rate applies if the refund follows an appellate order and 60 days have passed since the second application.
Additionally, the court emphasized that deficiency memos must be issued within 15 days, and any delay in doing so should not disadvantage taxpayers or delay their interest payments. Consequently, the court remanded the matter to the Adjudicating Authority to accurately recompute the interest liability based on these guidelines. The recomputation was ordered to be completed within two months, with the payment of due interest to follow within one month thereafter.
Order date: 15 Sept 2025
Parties: Ernst & Young Ltd. v. Assistant Commissioner, Vasant Kunj & Anr.
Facts –
- Petitioner (E&Y) sought interest on delayed GST refunds for FYs 2017–18 to 2021–22. Refunds were sanctioned through orders-in-original in June 2023 and August 2023.
- Petitioner computed interest liability at approx. ₹28.4 lakhs, applying 6% and 9% rates under Section 56 of the CGST Act. Revenue opposed, arguing delay was due to deficiencies in applications and suggested remand based on GS Industries precedent.
- Petitioner relied on Bansal International and other HC judgments to assert entitlement to statutory interest.
Issue -
- Whether the petitioner is entitled to interest on delayed GST refunds under Section 56, and from which date/rate (6% or 9%) such interest should accrue?
Order -
- The Court held that interest is a statutory right under Section 56 of the CGST Act and must follow the timelines prescribed.
- It clarified that Interest @ 6% is payable if refund is not granted within 60 days from the date of filing the first application (FORM GST RFD-01).
- Interest @ 9% applies where refund is granted pursuant to appellate orders and 60 days have lapsed from the date of the second application.
- The Court stressed that deficiency memos under Rule 90 must be issued within 15 days; any delay in issuing such memos cannot be used to prejudice taxpayers or deny them timely interest. The matter was remanded to the Adjudicating Authority to recompute the exact interest liability in terms of these principles.
- The recomputation was directed to be completed within two months, and payment of due interest must be made within one month thereafter.
