Delhi HC Remands Ernst & Young’s Refund Interest Claim; Directs Computation Under CGST Act

The petitioner filed a writ petition challenging the non-grant of statutory interest on refunds relating to FYs 2017-18 to 2021-22. Refunds were sanctioned pursuant to Orders-in-Original dated 19.06.2023 and 24.08.2023. However, no interest was paid on the delayed refunds.

The petitioner computed total interest at Rs. 28.40 lakh, contending that under Section 56 of the CGST Act, interest at 6% or 9% was payable depending on the stage of proceedings. The Department argued that the matter should be remanded to the Adjudicating Authority for fresh computation in line with M/s GS Industries v. Commissioner of Central Tax and GST Delhi West.

Main Issue: Whether the petitioner was entitled to statutory interest on delayed refunds, and if so, at what rate under Section 56 of the CGST Act.

HC’s Decision: The Court examined Sections 54 and 56 of the CGST Act and the scheme for delayed refund interest, referring to its earlier decision in Bansal International v. Commissioner of DGST. It reiterated that interest at 6% per annum applies where refunds are delayed beyond 60 days from the first application, and 9% applies where refund claims attain finality in appellate proceedings and remain unpaid beyond 60 days of a second application.

It also noted that deficiency memos must be issued within 15 days under Rule 90 of the CGST Rules, and any delay in doing so cannot prejudice the assessee. In this case, since deficiencies were not communicated within the stipulated period, the assessee was entitled to interest for the delay.

Thus, the matter was remanded to the Adjudicating Authority to compute the interest strictly in terms of GS Industries within two months, with payment to follow within one month thereafter. The writ petition was disposed of with liberty to the petitioner to avail further remedies if needed.

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