Delhi HC awards 6% interest on VAT refund delayed by over 15 years

The petitioners, Fair Deal Leather Suppliers and M/s Nand Leather Co., filed VAT returns for the quarter ending 31 March 2009 claiming refund of Rs. 2,87,538. Though the returns were filed in April 2009, the refund claim was rejected through an ex parte default assessment order passed in September 2011.

Upon discovering the rejection years later, the petitioners approached the Delhi High Court, which in 2018 relegated them to the appellate remedy while keeping the issue of limitation open. The appellate authority eventually remanded the matter in February 2024, following which the assessing authority sanctioned the refund in August 2024. The refund amount was ultimately credited to the petitioners’ bank account only on 15 January 2025, prompting the present writ petitions seeking statutory interest for the prolonged delay.

Main Issue: Whether the petitioners were entitled to statutory interest under Sections 38 and 42 of the Delhi Value Added Tax Act, 2004 on a refund granted after more than 15 years, when the delay was attributable to lack of proper service and non-uploading of assessment orders by the department.

HC Decided: The Delhi High Court held that the petitioners could not be faulted for the extraordinary delay in grant of refund, as the record did not establish proper service of statutory notices or timely uploading of the assessment order rejecting the refund claim. The Court found that the delay was a direct consequence of procedural lapses on the part of the tax department and not due to any negligence or deliberate conduct of the petitioners. Relying on settled law, including Sandvik Asia Ltd. and Corsan Corviam Construction, the Court ruled that once refund was found admissible, interest followed as a statutory consequence.

The respondents were directed to pay simple interest at 6% per annum on the refunded amount of Rs. 2,87,538 from 25 June 2009 (after expiry of 60 days from filing of return) till 15 January 2025, and to release the interest within 12 weeks.

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