HC orders refund of unutilised Input Tax Credit under CGST Act with interest if delayed by next hearing

The HC directed the respondents to process the refund of accumulated unutilised Input Tax Credit and credit it to the petitioner's account by the next hearing date. Failure to comply may result in the court issuing further directions regarding the refund and applicable interest under the CGST Act. The matter was adjourned to 28th May, 2025.

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ISSUES:

Whether the delay in issuance of acknowledgement of refund application beyond 15 days as mandated under Rule 90 of the CGST Rules, 2017, results in loss of the Department's right to raise deficiency memos.Whether the delay in passing refund orders beyond 60 days from issuance of acknowledgement under Section 54(7) of the CGST Act, 2017, entitles the applicant to refund along with interest.Whether in case of departmental delay in refund processing, a higher rate of interest under Section 50(1) of the CGST Act is payable by the Department.The legal consequences of non-issuance of deficiency memos within the statutory timeline and its impact on the refund claim process.

RULINGS / HOLDINGS:

The Court held that "if no deficiency memo is issued within the period of 15 days in terms of the Scheme of Rule 90 of the CGST Rules, then after the expiry of the period of 15 days within which acknowledgment is to be issued, no deficiency memo can even be raised."The Court affirmed that the refund application is "presumed to be complete in all respects" if neither acknowledgment nor deficiency memo is issued within the stipulated 15-day period, thereby entitling the applicant to refund processing without further delay.The Court recognized that delay beyond 60 days for passing refund orders under Section 54(7) attracts payment of interest as stipulated by law.The Court indicated that failure to process refund timely may warrant payment of interest at a higher rate as prescribed under Section 50(1) of the CGST Act, in case of departmental default.The Court directed that the refund be processed and credited forthwith in accordance with law, failing which it would consider issuing further directions on refund and interest rates.

RATIONALE:

The Court applied the statutory framework under the Central Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Rules, 2017, specifically Rule 90 concerning timelines for issuance of acknowledgement or deficiency memo, and Section 54(7) concerning timelines for refund order issuance.The Court relied on precedent emphasizing that Rules 90 and 91 provide a "complete code" for refund application scrutiny and grant, with strict timelines that cannot be extended by the Department's inaction.The Court underscored that non-compliance with prescribed timelines leads to consequences such as interest payment under Section 56 and possibly higher interest under Section 50(1) for departmental delay.The judgment reflects a strict interpretation of procedural timelines to protect the applicant's right to timely refund and interest, rejecting hyper-technical departmental pleas to delay refund processing beyond statutory limits.

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