Interest on delayed refund interest can be awarded in writ jurisdiction where the department wrongfully withholds payment.

In writ jurisdiction, the Gujarat HC recognised that where excise refund had been sanctioned earlier but the statutory interest on that refund was itself wrongfully withheld for an inordinate period, the department could not escape liability merely because the statute did not expressly provide for "interest on interest." Treating the earlier revenue view as inapposite on the peculiar facts, the Court applied the later binding clarification and the legal position that interest runs from the date the refund became due. It therefore granted reasonable compensation by way of interest and directed simple interest at 9% per annum on the delayed interest amount for the relevant period.

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Issues: Whether the assessee was entitled, in writ jurisdiction, to interest on the delayed payment of interest on excise refund when the underlying refund had been sanctioned long earlier but the interest component was itself paid belatedly.

Analysis: The refund claims had been pursued for years and the assessee had succeeded on classification and refund. The authorities wrongly denied or delayed the refund and then further delayed payment of interest on that refund. The statutory provision for delayed refund interest did not expressly provide for interest on interest, but the Court held that the department could not avoid liability in the peculiar facts where the amount of interest was unlawfully withheld for a substantial period. The earlier departmental and tribunal view relied upon by the revenue was treated as inapposite, while the binding clarification and later legal position supported interest from the date the refund became due. Since the claim fell outside the strict statutory rate framework, the Court granted reasonable compensation by way of interest.

Conclusion: The assessee was entitled to interest on the delayed payment of interest, and the claim was allowed by directing simple interest at 9% per annum on the delayed interest amount for the relevant period.

Ratio Decidendi: Where refund interest payable under the excise law is itself wrongfully withheld for an inordinate period, the Court may award reasonable interest on such delayed interest in writ jurisdiction, even though the statute does not expressly provide for interest on interest.

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