Vivad Se Vishwas refund delay: interest awarded for post-Form 5 delay, revenue directed to pay 6% annually.

Form 5 certificate issued on 24.11.2021 created a mandatory 30 day period within which a consequential refund order should have been made; the consequential order issued nearly 23 months later. Section 7 of the Vivad Se Vishwas Act bars interest on amounts paid prior to a declaration, but does not protect revenue from liability for interest arising from post declaration delay. The court concluded that retention of the refund after expiry of the 30 day period converted the sum into a debt of the revenue and directed respondents to pay interest at 6% per annum for the period from 24.11.2021 to 29.11.2023.

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Issues: (i) Whether the petitioner is entitled to interest on the amount ordered to be refunded pursuant to a Form 5 certificate under the Direct Tax Vivad Se Vishwas Act, 2020, for the period of delay between issuance of the certificate and actual payment of the refund.

Analysis: The statutory scheme under the Direct Tax Vivad Se Vishwas Act, 2020 contemplates submission of a declaration (Section 4), determination by the Designated Authority and issuance of a certificate of amount payable (Section 5), and contains a provision regarding non-refund and exclusion of interest in specific circumstances (Section 7). Where a Form 5 certificate issues, consequential orders are required to be passed within the prescribed period and any refund crystallised by such certificate becomes a debt payable by the revenue. The Explanation to Section 7 of the VSV Act bars interest only on amounts paid prior to making the declaration, and does not immunise the revenue from liability for interest arising from wrongful or delayed retention after the certificate has issued. Principles established by precedent recognise that retention and use of money without right attracts an obligation to repay with interest; where a departmental timeline for issuing consequential orders exists, failure to comply and consequent delayed payment gives rise to entitlement to interest. The rate applicable for such interest has been treated as the rate under Section 244A of the Income-tax Act, 1961 in comparable authorities.

Conclusion: The petitioner is entitled to interest on the refunded amount from the date on which interest liability arose following issuance of the Form 5 certificate (24.11.2021) until the date of actual refund (29.11.2023), to be calculated at the rate of 6% per annum and paid within thirty days.

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