Delhi HC allows interest on Delayed Tax Refund [Read Order]

In a significant case, the Delhi High Court allowed the interest on delayed tax refunds since the authority failed to pay the granted refund.

Alex Tour and Travel Pvt ltd, the petitioner filed refund applications, all dated 13.04.2021, claiming a refund of unutilised Input Tax Credit, amounting to ₹46,38,276/- for the financial year 2018-19.  Thereafter, on 14.04.2021, the petitioner filed applications seeking a refund of the unutilised Input Tax Credit, amounting to an aggregate sum of ₹2,15,63,451/- for the period 2019-20. 

The applications filed by the petitioner for a refund of un utilised ITC were rejected, inter alia, on the ground that the services provided by the petitioner were intermediary and did not qualify for export of services.  The respondent also raised an issue regarding the non-furnishing of the Foreign Inward Remittance Certificate (‘FIRC’).

The petitioner stated that it was not feasible to co-relate invoices with separate FIRCs and a consolidated FIRC would be sufficient to claim the refund for the unutilised Input Tax Credit. The petitioner filed appeals against the orders dated 14.06.2021 (seven in number) passed by the adjudicating authority under Section 54(5) of the Central Goods and Service Tax Act, 2017.

The appellate authority allowed the said appeals and accepted the petitioner’s contention that in the case of voluminous transactions of export of services to customers located outside India, submission of transaction-wise FIRCs was not feasible. 

The petitioner again filed Form GST RFD-01 for a grant of refund along with interest. Notwithstanding that the petitioner has succeeded before the appellate authority, the respondent has not processed the petitioner’s claim for a refund.

The respondent stated that after the appellate authority had passed the Orders-in-Appeal, they passed the Deficiency Memos and Show Cause Notices. It was contended that since the petitioner did not respond to the said Show Cause Notices or Deficiency Memos, the claim for refund has not been processed.

The appellate authority has not granted any interest on the amount of refund due.  However, more than one year has elapsed in the case of Order-in-Appeal dated 08.02.2022 and almost ten months have elapsed in respect of Orders-in-Appeal dated 28.07.2022. The petitioner cannot be denied interest as payable for the period of delay in refunding the amount due to the petitioner.

A two-judge bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan observed that the petitioner is also entitled to an interest by the law. While allowing the appeal, the Court directed the respondent to forthwith disburse the petitioner’s claim for refund along with interest as payable by the law.

To Read the full text of the Order CLICK HERE

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