Delhi High Court Directs Expeditious Disposal of Refund Applications and Clarifies Interest Entitlement on Delayed GST Refunds

Gameloft Software Private Limited, the petitioner, went to the High Court asking for a quick disposal of its refund applications for excess Integrated GST paid from April 2019 to June 2020, which amounted to Rs. 1,87,84,018/-. The refund applications were submitted in April 2022 but were turned down by the orders dated 6th and 7th July 2022 due to inadequate supporting documents. Subsequently, revised refund applications were lodged on 30th and 31st March 2023. Even though the CGST Rules under Rule 90(2) mandate the issuing of a deficiency memo within 15 days of making an application, the department issued it late on 11th April 2023, just saying that “supporting documents were incomplete.” The petitioner then made numerous representations, but still the refund was held up.

Issue Raised: The question that arose was whether the interest under Section 56 of the CGST Act must be paid for a delay in the processing of refund applications when the department does not issue a deficiency memo within the 15-day period laid down under Rule 90 of the CGST Rules.

Court’s Decision: The Court went through the processing of refunds under Sections 54 and 56 of the CGST Act, together with Rule 90 of the CGST Rules and referred to some past cases, including the case of G S Industries v. Commissioner of Central Tax and GST Delhi West and Bansal International v. Commissioner of DGST. It also mentioned that interest at 6 per cent per annum is due if there is a delay of more than 60 days in refunding the application, and then 9 percent if the delay is after the appellate confirmation of the claim. The Bench remarked that the department’s non-issuance of a deficiency memo within the stipulated 15-day period amounts to a delay, and hence the taxpayer is entitled to interest for that period, except where the taxpayer is indeed responsible for the delay in addressing the deficiencies of a genuine nature.

The Court held that the petitioner cannot be denied the benefit of interest for the delay attributable to the department’s failure to issue the deficiency memo within the statutory limit, noted the period of 15 days as mentioned in Rule 90(2). It referred to the legislative arrangement which required refund applications to be disposed of within 60 days and pointed out that the department’s failure to act has a direct influence on the taxpayer’s entitlement to refund and interest as per Section 56. The Court reaffirmed that delays on the part of the department cannot suppress statutory rights and that any lateness in payment by the revenue should incur equal interest liability.

The Court recognised that the petitioner took approximately 74 days to respond to the deficiency memo and clarified that this period would not be counted for the computation of interest. The Bench took notice of the fact that refund processing delays have a domino effect even on the very operations of the business and so directed the department to provide the petitioner with a hearing on 10 November 2025, either in person or online, and to ensure that the refund orders are passed in accordance with law within one month thereafter.

To Read Full Judgment, Download PDF Given Below