Delayed VAT refund interest is payable until disbursal, but recovery is limited by limitation and statutory timing rules.

Interest on delayed VAT refunds was treated as payable from the time the refund became due under the Delhi Value Added Tax Act, 2004, with simple interest continuing until actual disbursal under the statutory scheme. The claim for interest was also confined by the Limitation Act, so it could not run indefinitely and was limited to the three-year period immediately preceding the filing of the petition. The applicable rate was 6% per annum in terms of the notified rate, and interest was to be calculated on the refunded amount for the permissible period only.

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Issues: Entitlement to interest on delayed refund under the Delhi Value Added Tax Act, 2004, and the period for which such interest could be claimed.

Analysis: The refund became payable within the statutory time contemplated by Section 38(3)(a)(i) of the Delhi Value Added Tax Act, 2004, and Section 42(1) provided for simple interest on the refund amount until the date the refund was actually granted. The Court also applied Article 25 of the Schedule to the Limitation Act, 1963, to the claim for interest, holding that the claim could not extend indefinitely and would be confined to the limitation period immediately preceding the filing of the petition. On the facts, interest was to be calculated at 6% per annum in terms of the notified rate.

Conclusion: The petitioner was held entitled to interest on the refunded amount, but only for the three-year period immediately preceding the filing of the petition and until the date of disbursal, at 6% per annum.

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