In a recent judgment, the Delhi High Court ruled that a dealer is not entitled to interest on a VAT refund for the period during which the delay in processing the refund was caused by the dealer itself.
Lithium Urban Technologies Pvt. Ltd., an electric mobility service provider, had filed a writ petition seeking a refund of Rs. 25,40,422 along with interest. The refund claim was based on the company’s VAT return for the first quarter of the financial year 2017–18, filed in July 2017.
According to the petitioner, the refund should have been processed within two months, i.e., by September 2017, as per Section 38(3) of the DVAT Act. Since the refund was not received, the company approached the High Court in April 2023.
During the proceedings, the VAT department informed the court that the refund had been issued on June 8, 2023, after the petitioner updated its bank details in February 2023. The department also stated that interest had been paid for the period from February 7 to June 8, 2023, but the petitioner argued that it was entitled to interest from September 2017, the date when the refund became due.
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The department justified its argument by relying on the Explanation to Section 42(1) of the DVAT Act, which states:
“If the delay in granting the refund is attributable to the said person, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which the interest is payable.”
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Citing this provision, the department argued that the petitioner had initially submitted incorrect bank account details and corrected them only in February 2023, so the delay in the refund was entirely attributable to the petitioner.
On the other hand, the petitioner did not produce any correspondence or proof of the timely correction of the bank details between 2017 and 2023. The bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta observed that the petitioner’s own failure to update its bank details had caused the delay, and under the DVAT Act, it was not entitled to interest for that period.
The court found no merit in the claim for interest prior to February 2023 and upheld the Special Commissioner’s order dated July 5, 2023. At this stage, counsel for the petitioner sought permission to withdraw the petition. The court allowed the request, and the writ petition was dismissed as withdrawn.
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