Interest is payable at 6% if refund is not granted within 60 days from the date of the original refund application.

The Hon’ble Bombay High Court in the case of Altisource Business Solutions India Pvt. Ltd. v. Union of India & Ors. [2025 (10) TMI 485 - BOMBAY HIGH COURT] held that interest at 6% under Section 56 of the CGST Act is mandatory if the refund is not made within 60 days from the date of the original refund application to the proper officer, even if the refund claim was initially rejected but later allowed by an appellate authority. The Court relied on its earlier ruling in Lupin Laboratories Ltd. and aligned with Delhi and Telangana High Court views that reject the Revenue's contention that the interest period starts only after a fresh application following the appellate order.

Facts:

Altisource Business Solutions India Pvt. Ltd. ('the Petitioner') filed a refund claim which was initially rejected by the original authority on September 14, 2020. The Appellate Authority subsequently allowed the claim by order dated October 27, 2023. The Petitioner then re-applied for the refund on November 28, 2023, which was sanctioned on January 15, 2024 and credited on February 05, 2024.

The Petitioner contended that interest under Section 56 at 6% per annum was payable from 60 days after the first (original) refund application as the refund was delayed beyond that period, relying on the decision in Lupin Laboratories Ltd.

The Respondent contended that, since the refund was sanctioned within 60 days of the re-application after the appellate authority's order, there was no liability to pay interest. They maintained that no interest is payable unless the refund remains unpaid 60 days post-fresh application, not from the first rejection date.

The Petitioner approached the High Court via writ petition challenging non-payment of interest for the entire delay period attributable to the initial rejection of the refund.

Issue:

Whether interest under Section 56 of the CGST Act is payable from 60 days after the date of the original refund application when initial denial of refund is later overturned, or only after a new refund application post-appellate order?

Held:

The Hon’ble Bombay High Court in 2025 (10) TMI 485 - BOMBAY HIGH COURTheld as under:

• Observed that, a “conjoint and meaningful reading” of Section 54 and Section 56 of the CGST Act, establishes entitlement to interest from 60 days after the original refund application to the proper officer, not after a fresh appellate application.
• Noted that, “the object to compensate the person who has claimed a refund” would be defeated if interest ran only from the final application date.
• Observed the distinction between initial and fresh applications to be “not the scheme of the statute”; the Explanations to Section 56 contemplate refund applications under Section 54(1), and rejected the Revenue arguments that only the period from the post-appellate reapplication triggers interest.
• Further directed the respondents to pay interest at 6% per annum from the expiry of 60 days from the date of the Petitioner’s original refund application.

Our Comments:

This judgment continues a consistent judicial approach favoring substantive taxpayer relief and compensatory treatment for delayed revenue payments. The Bombay High Court explicitly aligns with its ruling in Lupin Limited vs. Union of India & Ors. [2025 (8) TMI 703 - BOMBAY HIGH COURT], as well as the judgements of the Delhi and Telangana High Courts, in holding that interest under Section 56 of the CGST Act is triggered 60 days from the earliest refund application, regardless of any initial rejection overturned by subsequent appeal.

This approach echoes the Supreme Court’s view in Ranbaxy Laboratories Ltd. v. Union of India [2011 (10) TMI 16 - Supreme Court], interpreting similar interest provisions under the Central Excise Act, that interest automatically accrues for any period of administrative delay following a valid application, unless the applicant is at fault.

The Court distinguishes the “First Authority” (adjudicating officer’s order) from the “First Appellate Authority,” clarifying that both situations are separately compensated. The judgment diverges from the Revenue’s technical reading of “application date” to insist on a purposive construction protecting the taxpayer.

Relevant Provisions:

Section 54 of the CGST Act, 2017:

“54. Refund of tax.-

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in such form and manner as may be prescribed.

(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of two years from the last day of the quarter in which such supply was received…”

Section 56 of the CGST Act, 2017:

“56. Interest on delayed refunds.-

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund…”

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