Interest on delayed refund runs from the original application date

Interest on delayed refund runs from the original application date, not the subsequent re-filing.

Issue

Whether the interest on a delayed GST refund under Section 56 must be calculated from the expiry of 60 days from the date of the original refund application, or whether a subsequent re-filing date forced by an illegal rejection of the original application can be treated as the relevant date to deny or postpone interest.

Facts

The petitioner filed their original refund application under the CGST Act on October 14, 2023.
The tax department did not accept this original application.
The petitioner challenged this refusal in a writ petition, which resulted in a court order dated November 6, 2025, setting aside the department’s refusal and directing them to process the refund.
Pursuant to the High Court’s directions, the petitioner re-filed the refund application on November 11, 2025.
The Proper Officer sanctioned the refund but denied the interest on the delay by treating the re-filing date (November 11, 2025) as the “relevant date” under Section 56.
The petitioner filed the present writ petition to challenge the denial of interest on the delayed refund.

Decision

Held, yes: The issue was decided entirely in favor of the assessee, and the department’s denial of interest was set aside.
Original Filing Date Maintained: The court held that the original refund application dated October 14, 2023, was undisputed and remained the foundational application.
Illegal Rejection Cannot Defer Interest: The initial refusal by the department was illegal, and the tax authorities cannot use their own wrong to postpone interest liability by forcing a mechanical re-filing.
Calculation Under Section 56: The interest on the delayed refund must run with reference to the original application filed under Section 54 on October 14, 2023.
Direction to Grant Interest: The court directed the respondents to grant the interest on the delayed refund, reckoning the calculation from the original filing date.

Key Takeaways

No Premium on Systemic Rejections: The revenue cannot escape or defer interest liabilities on delayed refunds by illegally rejecting or non-admitting valid refund applications.
Vested Right to Interest: Under Section 56, the interest clock starts running 60 days from the date of receipt of the original application under Section 54. A subsequent court-ordered re-filing is merely a procedural step to execute the original claim.
Substantive Justice Prevails: The “relevant date” for calculating interest remains anchored to the date the taxpayer first knocked on the department’s door with a valid application, preventing administrative delays from wiping out statutory interest entitlements.

HIGH COURT OF GUJARAT

Kuehne Nagel (P.) Ltd.

Union of India

A.S. Supehia and Ms. VAIBHAVI D. NANAVATI, JJ.

R/SPECIAL CIVIL APPLICATION Nos. 663, 667, 669, 671, 4373 and 4408 of 2026

JULY 2, 2026

Dhruv Toliya for the Petitioner. Raj Tanna, Ms. Nimisha J. Parekh, AGPs and Ankit Shah for the Respondent.

JUDGMENT

A.S. Supehia, J. – Rule returnable forthwith. Learned Assistant Government Pleader and learned Senior Standing Counsel waives service of notice of Rule for and on behalf of the respective respondents in respective captioned writ petitions.

2. Since the issue involved in all the captioned petitions are identical, with consent of learned advocates appearing for the respective parties, are taken up for final disposal. The Special Civil Application No.4373 of 2026 is treated as the lead matter. For the purpose of passing the present order, the facts are incorporated from the said petition.

3. In the present petition, the petitioner has prayed for quashing and setting aside the impugned order dated 09.02.2026 passed by the respondent No.3 to the extent of denial of interest. The petitioner has been paid the amount of refund of Rs.2,29,32,535/- however, the interest claimed amounting to Rs.29,51,700/- is rejected by assigning the reason that the condition for accrual of interest under Section 56 of the Central Goods and Services Tax Act, 2017 (for short ‘the CGST Act’) are not satisfied.

4. It is not in dispute that the petitioner had filed the original refund application dated 14.10.2023, however, the said refund application was not accepted, which constrained the petitioner to file the writ petition being Kuehne Plus Nagel (P.) Ltd. v. Union of India (Guj)/Special Civil Application No.12151 of 2025. By the judgment and order dated 06.11.2025, this Court set aside the action of the respondents in refusing the refund application. Thereafter, the respondent authority passed the impugned order sanctioning the refund however, denying the interest as mentioned herein above.

4.1 The original refund application filed by the petitioner on 14.10.2023 since was rejected and pursuant to the order passed by this Court, the petitioner again filed the refund application on 11.11.2025 however, the respondent authorities have denied the interest by invoking the provisions of Section 56 of the CGST Act. The respondent – Proper Officer has construed the date of subsequent filing of the refund application to deny the interest.

5. This Court in the judgment and order dated 06.11.2025 while allowing the writ petition being Special Civil Application No.12151 of 2025, has observed thus:

“7. It was, thus, held by this Court that the Chartered Accountant’s Certificate produced by the petitioner was bound to be considered by the respondent. In view of the same and in view of the decision rendered by this Court in Special Civil Application No. 13427 of 2024, the respondent authorities are directed to process the refund claim of the petitioner filed for the period from July 2021 to September, 2021 and October 2021 to December 2021 in accordance with law within a period of twelve weeks from the date of receipt of copy of this order.”

6. Thus, the Court found the action of the respondents in denying the refund in processing the refund application, which was filed on 14.10.2023, and in fact, it is observed that the refund application ought to have been processed in view of the Chartered Accountant’s Certificate produced by the petitioner.

7. Under the circumstances, we are of the considered opinion that the respondent authority was required to consider the date of initial refund application filed by the petitioner for calculating the interest instead of the subsequent application, which was filed after the order passed by this Court, in wake of the fact that the initial action of the respondents in refusing the process the refund pursuant to the claim filed by the petitioner vide application dated 14.10.2023 was held illegal, upon setting aside the former action of denial of refund, the fresh application filed for refund satisfies the provisions of Section 56 of the Act and the claim of interest has to be processed by considering the date of earlier application. Thus, we direct the respondents to pass necessary orders on the respective claim of interest on refund filed by the petitioner in light of the observations made by this Court. The impugned orders to such extent are set aside. The same shall be done within a period of twelve (12) weeks from the date of receipt of this order. All the captioned writ petitions stand allowed, accordingly. Rule is made absolute to the aforesaid extent. No order as to costs.