The Gujarat High Court addressed the issue of interest on delayed GST refunds in the case of Vineet Polyfab Pvt. Ltd. & Anr. v. Union of India & Ors., where the petitioner, an exporter of polyester yarn, faced a delay in receiving an IGST refund due to a technical glitch in the government’s system. Despite fulfilling all export and compliance requirements, the refund was not processed automatically because of a communication error between the GSTN and ICES systems. The petitioner’s repeated efforts to resolve the issue with customs and GST authorities were unsuccessful, leading them to seek judicial intervention.
The court was tasked with determining whether the petitioner was entitled to interest under Section 56 of the CGST Act for the delayed refund caused by the technical error. The court ruled that interest under this section is mandatory and must be paid if a refund is sanctioned more than 60 days after the application, irrespective of the cause of delay. The court emphasized that the delay was due to a system fault and not the petitioner’s actions. It cited previous rulings, including Ranbaxy Laboratories Ltd. and Panji Engineering Pvt. Ltd., reinforcing that such interest is compensatory, intended to reimburse taxpayers for the delay in accessing their funds.
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The court ordered the respondents to calculate and pay the statutory interest on the delayed refund within 12 weeks, affirming that administrative failures or portal issues do not exempt the government from its statutory obligations.
Case Title: Vineet Polyfab Pvt. Ltd. & Anr. v. Union of India & Ors.
Order Date: 19 September 2025
Facts:
- The petitioner, an exporter of polyester yarn, exported goods through Hazira Port and paid IGST of ₹7,53,469 on five shipping bills.
- Despite successful exports and compliance, the IGST refund was not auto-processed due to a technical glitch between GSTN and ICES systems (error code SB000).
- Repeated representations to the Customs and GST authorities were ignored, compelling the petitioner to approach the High Court.
- Subsequently, the Principal Commissioner permitted manual refund sanction, but denied interest under Section 56 of the CGST Act, claiming the delay was due to system limitations and not administrative fault.
Issue:
- Whether the petitioner is entitled to interest under Section 56 of the CGST Act, 2017 for refund delayed due to technical error in the government system.?
Order:
- The Court held that interest under Section 56 is mandatory and payable once the refund is sanctioned beyond 60 days from the date of application, regardless of the reason for delay.
- It observed that the delay arose solely due to technical glitch in the government’s system and not due to any fault of the petitioner.
- Relying on Ranbaxy Laboratories Ltd. v. Union of India (2011) and Panji Engineering Pvt. Ltd. v. Union of India (2023), the Bench reiterated that interest accrues automatically after the expiry of the statutory period and is not dependent on adjudicatory findings of petitione
- The Court clarified that interest is compensatory in nature, meant to compensate taxpayers deprived of their rightful funds, and cannot be withheld due to systemic or procedural inefficiency.
- The respondents were directed to calculate and pay statutory interest on the delayed refund within 12 weeks, holding that administrative lapses or portal malfunction cannot dilute statutory liability.
