Refund of Unutilized ITC: Department Directed to Process Refund Expeditiously Due to Delays in Acknowledgement and Disbursement
Issue:
Whether the Goods and Services Tax (GST) department can delay the processing of a refund of unutilized Input Tax Credit (ITC) by failing to issue an acknowledgment within 15 days (Rule 90) or failing to issue the refund within 60 days (Section 54(7)), and whether such delays warrant a direction to process the refund with potential interest.
Facts:
For the period October 2024 to February 2025, the petitioner alleged that the department had deliberately delayed the refund process for unutilized ITC at different stages. Specifically, the petitioner highlighted:
- A delay in the issuance of the acknowledgment, which, according to Rule 90 of the Central Goods and Services Tax Rules, 2017, should be done within 15 days of filing the application.
- Non-issuance of the refund within 60 days from the date of issuance of the acknowledgment, as mandated by Section 54(7) of the Central Goods and Services Tax Act, 2017.
The petitioner submitted that if no deficiency memo was issued within the 15-day period (as per Rule 90), then after the expiry of that period, no deficiency memo could even be raised.
Decision:
The court ruled in favor of the assessee. The department was directed to process the refund in accordance with law and ensure it was credited to the petitioner’s account by the next date of hearing. The court explicitly stated that failing to do so, appropriate directions would be passed in respect of the refund and the applicable rate of interest. The matter was listed for further hearing.
Key Takeaways:
- Time-Bound Refund Processing (Section 54(7) & Rule 90): The GST law provides strict timelines for processing refund applications. Rule 90 mandates acknowledgment within 15 days, and Section 54(7) requires the refund to be sanctioned within 60 days of the application.
- Consequence of Delay in Acknowledgment/Deficiency Memo: If the department fails to issue a deficiency memo within the stipulated 15-day period (as per Rule 90), it generally loses the right to raise a deficiency memo for that specific application. This means the application is deemed complete for processing.
- Statutory Interest on Delayed Refunds: Section 56 of the CGST Act provides for interest on delayed refunds. If a refund is not granted within the stipulated 60 days, interest is payable from the date immediately after the expiry of the 60-day period.
- Judicial Intervention for Timely Refunds: Courts will intervene and issue directions to tax authorities to ensure that refunds are processed within the statutory timelines, especially when there are clear delays or procedural lapses by the department.
- Protection for Assessees: This decision is strongly in favor of the assessee, as it compels the department to expedite the refund process under the threat of further adverse directions regarding the refund amount and interest.
- “Matter Listed”: The fact that the matter is listed for the “next date of hearing” reinforces the court’s intent to monitor compliance and ensure the refund is indeed processed, with a clear warning about interest if the deadline is missed.
HIGH COURT OF DELHI
M.D. Securities (P.) Ltd.
v.
Sales Tax Officer Avato
PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.
W.P. (C) No. 6375 OF 2025
MAY 14, 2025
Kishore Kunal, Ms. Ankita Prakash and Anuj Kumar, Advs. for the Petitioner. Sumit K Batra, Adv. for the Respondent.
ORDER
1. This hearing has been done through hybrid mode.
2. The present petition has been filed by the Petitioner- M.D. Securities Private Limited under Article 226 of the Constitution of India, inter alia, seeking refund of accumulated unutilised Input Tax Credit (hereinafter, ‘ITC’) of the following amounts:
| Period | RFD-01 filing date | RFD-02 issuance date | Outer timeline as per Section 54(7) to pass the refund order (60 days) | Delay | Delay Amount |
| October, 2024 | 22.11.2024 | 11.02.2025 | 21.01.2025 | 99 | 19,22,79,068/ |
| November, 2024 | 24.12.2024 | 14.02.2025 | 23.02.2025 | 67 | 20,49,02,090/- |
| December-January, 2025 | 12.03.2025 | Not issued till date | 11.05.2025 | — | 60,31,06,405/- |
| February, 2025 | 31.03.2025 | Not issued till date | 30.05.2025 | — | 6,78,86,999/- |
| Total | 106,81,74,562/- | ||||
3. The submission of Mr. Kishore Kunal, ld. Counsel appearing for the Petitioner is that the Department has deliberately delayed the refund sought by the Petitioner at the following stages:
| i. | At the stage of issuance of acknowledgement which has to be done within 15 days of filing of the application in terms of Rule 90 of the Central Goods and Services Tax Rules, 2017 (hereinafter, ‘CGST Rules’). |
| ii. | Issuance of refund within 60 days from the date of issuance of acknowledgement in terms of Section 54(7) of the Central Goods and Services Tax Act, 2017 (hereinafter, ‘CGST Act’). |
4. Ld. Counsel for the Petitioner relies upon the decision in Jian International v. Commissioner of Delhi Goods and Services Tax GST 828/39 GSTL 385 (Delhi) to argue 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 relevant portion of the said judgment reads as under:-
“6. Having heard Learned Counsel for the parties, this Court finds that Rules 90 and 91 of CGST/DGST Rules provide a complete code with regard to acknowledgement, scrutiny and grant of refund. The said Rules also provide a strict timeline for carrying out the aforesaid activities. For instance, Rules 90(2) and (3) of the DGST Rules states that within fifteen days from the date of filing of the refund application, the respondent has to either point out discrepancy/deficiency in FORM GST RFD-03 or acknowledge the refund application in FORM GSTRFD-02. In the event deficiencies are noted and communicated to the applicant, then the applicant would have to file a fresh refund application after rectifying the deficiencies. The relevant portion of Rule 90 of CGST/DGST Rules is reproduced hereinbelow :
…..
7. In the event of default or inaction to carry out the said activities within the stipulated period, consequences like payment of interest are stipulated in Section 56 of CGST/DGST Act.
8. Admittedly, till date the petitioner’s refund application dated 4th November, 2019 has not been processed. As neither any acknowledgment in FORM GST RFD-02 has been issued nor any deficiency memo has been issued in RFD-03 within timeline of fifteen days, the refund application would be presumed to be complete in all respects in accordance with sub-rule (2), (3) and (4) of Rule 89 of CGST/DGST Rules.
9. To allow the respondent to issue a deficiency memo today would amount to enabling the Respondent to process the refund application beyond the statutory timelines as provided under Rule 90 of the CGST Rules, referred above. This could then also be construed as rejection of the petitioner’s initial application for refund as the petitioner would thereafter have to file a fresh refund application after rectifying the alleged deficiencies. This would not only delay the petitioner’s right to seek refund, but also impair petitioner’s right to claim interest from the relevant date of filing of the original application for refund as provided under the Rules.
10. Moreover, the respondent’s prayer to raise a deficiency memo is a hyper-technical plea as admittedly, all the relevant documents have been annexed with the present writ petition and the respondent is satisfied about their authenticity.
11. Consequently, this Court is of the view that the respondent has lost the right to point out any deficiency, in the petitioner’s refund application, at this belated stage.
12. Accordingly, this Court directs the respondent to pay to the petitioner the refund along with interest in accordance with law within two weeks.”
5. It is, therefore, the submission of the ld. Counsel for the Petitioner that the entire amount deserves to be refunded to the Petitioner along with interest immediately, failing which the Department ought to pay a higher rate of interest as is charged from Assessees in terms of Section 50(1) of the CGST Act.
6. Mr. Batra, ld. Counsel for the Respondents submits that he wishes to seek instructions in the matter. Ld. Counsel further submits that he has been informed that the process of refund is already underway.
7. Accordingly, it is directed that the refund shall be processed in accordance with law and the same be credited to the Petitioner’s account by the next date of hearing, failing which in terms of the Scheme of the CGST Act, this Court would consider passing appropriate directions on the next date of hearing in respect of refund and rate of interest.
8. List on 28th May, 2025.