9% Interest Payable on GST Refunds if Not Released within 60 Days from Date of FAA’s Order: Bombay HC in Lupin Ltd Case [Read Order]

The Bombay High Court at Goa recently ruled in favour of Lupin Limited, holding that the company was entitled to interest at the rate of 9% per annum on the delayed refund of Goods and Services Tax ( GST ) if the refund was not released within sixty days from the date of the First Appellate Authority’s ( FAA ) order.

Justices Bharati Dangre and Nivedita P. Mehta observed that “when the amount is not refunded within 60 days from the date of the order passed by the First Authority, the proper officer and the interest at the rate of 9% from the date when the fresh application was made after the Appellate Authority allowed the appeals filed by the petitioner and revised the order in original, thereby allowing the entire claim of refund.”

The petitioner, Lupin Limited, a pharmaceutical company operating from Goa, had sought the release of its sanctioned GST refund along with applicable interest. The company’s refund application was earlier rejected by the adjudicating authority.

Aggrieved, Lupin preferred an appeal before the First Appellate Authority, which allowed the appeal and directed the release of the refund amount. Despite the FAA’s favourable order, the refund was not issued within the statutory period of sixty days, prompting the petitioner to approach the High Court for relief.

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The Counsel for Lupin Limited, Mr. Jatin Arora, argued that the GST Act clearly states the payment of interest on delayed refunds beyond the prescribed sixty-day period. He submitted that Section 56 of the Central Goods and Services Tax Act, 2017, read with Rule 94 of the CGST Rules, mandates the grant of interest at 6% from the date immediately after the expiry of sixty days until the date of refund.

Furthermore, relying on judicial precedents, including decisions of the Delhi High Court and Telangana High Court, he contended that where the delay was attributable to the revenue authorities and was unjustified, the interest rate could be enhanced to 9%.

The petitioner argued that the delay in implementing the FAA’s order was not only contrary to statutory provisions but also violative of the constitutional guarantee under Article 265 that no tax shall be collected without the authority of law.

On the other hand, the respondents, represented by the Deputy Solicitor General of India, Mr. Pravin Faldessai, and Central Government Standing Counsel, Ms. Asha Desai, defended the department’s actions.

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They submitted that the delay in the release of the refund was not deliberate but was due to administrative processing and verification requirements. The revenue contended that the statutory provision generally contemplates interest at 6% and that enhancement to 9% was not justified in the absence of mala fide intent.

The Court, after examining sections and the facts, observed that the statutory mandate under Section 56 of the CGST Act is clear once the FAA’s order attains finality and directs the grant of refund, the revenue authorities are bound to comply within sixty days. Any delay beyond this period automatically triggers the liability to pay interest at 9%.

Accordingly, the court directed that Lupin Limited be paid interest at 9% per annum from the sixty-first day after the FAA’s order until the date of actual refund.

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