GST ITC Utilisation Up to 90% is Not a Bar to Refund: Delhi HC Directs Dept to Pay Refund of Rs. 25,16,760 with Interest [Read Order]

The Delhi High Court has directed the GST Department to credit the sanctioned refund amount along with statutory interest in a matter concerning delayed release of unutilised Input Tax Credit (ITC).

In a petition filed by Phoenix Impex, grievance was expressed regarding a refund application of Rs. 25,16,760, submitted on January 15, 2024, for November 2023 under ARN No. AA0701240394778, which had not been processed within the mandatory timelines prescribed under Section 54 of the CGST Act. The petitioner placed reliance on a Calcutta High Court ruling in Suraj Mangar v. Assistant Commissioner of West Bengal State Tax, in order to reinforce that such statutory timelines cannot be diluted.

A Show Cause Notice was later issued on August 21, 2025, citing objections regarding the supplier M/s Garg Enterprises, including inadequate tax payment in cash and utilisation of over 90% ITC. The petitioner contended that utilisation of ITC up to such levels is permissible under Rule 86B of the CGST Rules.

The matter came up before a Bench comprising Justice Prathiba M. Singh and Justice Shail Jain, who examined the legal issue and directed the GST authorities to file their reply and grant a personal hearing to the petitioner.

Pursuant to these directions, a refund order dated September 19, 2025, sanctioned the entire refund amount but failed to address the interest component. Taking note of this omission, the Court held that since the refund has already been sanctioned, it must be credited along with the statutory interest payable under law. As a result, the authorities were directed to make the payment within one month.

The writ petition was disposed of accordingly, with the refund order remaining subject to the final outcome of the proceedings.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates