Interest on tax refunds accrues from refund application date where Rule 42 approval delays payment, producing entitlement.

Entitlement to statutory interest on tax refunds hinges on interplay between refund entitlement and the approval timeline under Rule 42; where the competent authority's approval process delays payment beyond the refund application date, interest accrues from that application date until release. The article applies settled precedent holding that completion of the Rule 42 approval within the period contemplated for refunds is required to shift the interest computation period; where approval delays payment, the taxpayer is entitled to interest for the intervening period. Writ disposed in favour of petitioner on that basis.

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Issues: Whether the petitioner is entitled to simple interest under Section 20 of the Haryana Value Added Tax Act, 2003 on the refund of Rs. 62,01,371/- from the date of application (22.04.2016) until the date of payment (28.08.2019), having regard to the approval procedure under Rule 42 of the Haryana Value Added Tax Rules, 2003 and the decision in M/s Raghav Industries.

Analysis: The Assessing Officer by order dated 14.08.2015 held the petitioner entitled to refund. Section 20 of the Haryana Value Added Tax Act, 2003 provides for refund and interest where amounts are found payable, and subsections (8)-(11) specify interest entitlement and timing. Rule 42 of the Haryana Value Added Tax Rules, 2003 prescribes the approval process by the prescribed authority and requires initiation of approval at least thirty days before expiry of the period for refund without interest, obliging the competent authority to decide in time. The Division Bench decision in M/s Raghav Industries interpreted Section 20 together with Rule 42 to require that the approval process be completed within the time contemplated under Section 20(9) so that the period for computing interest under Section 20(10) commences thereafter. The present matter is covered by that decision which has attained finality; the fact that refund was not allowed in the original 2006 assessment is immaterial given the appellate remand and subsequent order of 14.08.2015 allowing the refund. Applying Section 20 read with Rule 42 and the settled precedent, interest is payable from the date the refund application was made until the date the refund was released.

Conclusion: The petitioner is entitled to interest at the prescribed rate under Section 20 of the Haryana Value Added Tax Act, 2003 on the refund of Rs. 62,01,371/- for the period from 22.04.2016 (date of application) to 28.08.2019 (date of release of refund); writ petition disposed accordingly in favour of the petitioner.

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