The Gujarat High Court has ruled that interest on GST refunds should be calculated from the date of the original refund application if its rejection was later deemed illegal by the Court. This decision came in the case between Kuehne Nagel Pvt. Ltd. & Anr. and the Union of India & Ors. The petitioner initially filed a GST refund application on October 14, 2023, which was rejected by the department. This forced the petitioner to seek redress from the Gujarat High Court.
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On November 6, 2025, the High Court overturned the rejection, instructing the department to process the refund, emphasizing that the Chartered Accountant's Certificate provided by the petitioner should have been considered. Following this, the department sanctioned a refund of ₹2,29,32,535 but refused to grant interest of ₹29,51,700, using the date of a subsequent refund application as the basis for calculation under Section 56 of the CGST Act.
The petitioner contested this decision, arguing that interest should be calculated from the date of the original application, as the previous rejection was already declared unlawful. The Court agreed, noting that the fresh application was a procedural result of its earlier order and should not affect the computation of statutory interest. The Bench concluded that the original refund application, once revived, was valid for all legal purposes. Consequently, the High Court directed the authorities to reassess the interest claim using the initial application date and issue new orders within 12 weeks.
Order Date - 02 July 2026
Parties: Kuehne Nagel Pvt. Ltd. & Anr. Vs Union of India & Ors
Facts -
- Petitioner, Kuehne Nagel Pvt. Ltd. & Anr. filed a GST refund application on 14.10.2023, but the refund was rejected by the department, forcing the petitioner to approach the Gujarat High Court.
- The High Court, in an earlier judgment dated 06.11.2025, set aside the rejection and directed the department to process the refund after holding that the Chartered Accountant's Certificate submitted by the petitioner ought to have been considered.
- Pursuant to the Court's directions, the department sanctioned a refund of ₹2,29,32,535 but denied interest of ₹29,51,700, treating the fresh refund application filed on 11.11.2025 as the relevant date for interest under Section 56 of the CGST Act.
- Aggrieved by the denial of interest, the petitioner challenged the order, contending that interest should be computed from the date of the original refund application since the earlier rejection had already been declared illegal by the High Court.
Issue -
- Whether interest under Section 56 should be calculated from the date of the original refund application that was illegally rejected?
Order -
- The Court observed that the department had wrongly relied upon the date of the fresh refund application to deny interest. Since the original refund application had been rejected illegally, the subsequent application was merely a procedural consequence of the Court's earlier order and could not deprive the petitioner of statutory interest.
- The Court reiterated that its earlier judgment had already held that the refund claim should have been processed on the basis of the Chartered Accountant's Certificate submitted by the petitioner. Therefore, the delay in granting the refund was attributable entirely to the department's unlawful action.
- The Bench held that once the original rejection was quashed, the initial refund application revived for all legal purposes. Consequently, interest under Section 56 had to be computed by considering the date of the original application filed on 14.10.2023, and not the later application filed after the Court's intervention.
- Accordingly, the High Court set aside the impugned orders to the extent they denied interest and directed the authorities to reconsider and pass fresh orders on the petitioner's claim for interest within 12 weeks by treating the original refund application as the relevant date.
