Facts of the Case:

In this case, the petitioners filed writ petitions challenging separate orders passed by the GST authorities whereby refund claims were sanctioned but the corresponding claims for statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act) were rejected. In the lead matter, although the petitioner had originally filed a refund application on 14.10.2023, the authorities refused to process the same, compelling the petitioner to approach the High Court by filing an earlier writ petition. By judgment dated 06.11.2025, the High Court held that the rejection of the refund application was illegal and directed the authorities to process the refund claim in accordance with law after considering the Chartered Accountant’s Certificate produced by the petitioner. Pursuant to the Court’s directions, the petitioner filed a fresh refund application on 11.11.2025, following which the refund amount of ₹2,29,32,535 was sanctioned. However, the authorities denied interest of ₹29,51,700 by treating the subsequent application dated 11.11.2025 as the relevant refund application for the purposes of Section 56, holding that the statutory conditions for payment of interest were not satisfied. Aggrieved by the denial of interest, the petitioners approached the High Court.

Issue:

Whether, where the original refund application was illegally rejected by the GST authorities and the refund was subsequently granted pursuant to a High Court order, the entitlement to interest under Section 56 of the CGST Act should be computed from the date of the original refund application or from the date of the fresh refund application filed after the Court’s directions.

Held That:

The Court observed that the petitioner had initially filed a valid refund application on 14.10.2023, but the authorities had illegally refused to process it despite the petitioner having produced the requisite Chartered Accountant’s Certificate. This illegality had already been recognised by the High Court in the earlier round of litigation, wherein the authorities were directed to process the refund claim in accordance with law.

The Court held that once the earlier action of the department in refusing to process the original refund application had been declared illegal and set aside, the subsequent refund application filed pursuant to the Court’s directions could not be treated as a fresh application for determining entitlement to interest under Section 56 of the CGST Act. The subsequent application was merely a procedural consequence of the Court’s order and did not extinguish the legal effect of the original refund claim. Therefore, for the purpose of computing statutory interest, the relevant date had to be the date of the initial refund application, since the delay in grant of refund was solely attributable to the illegal action of the department.

Accordingly, the High Court set aside the impugned orders to the extent they denied interest and directed the respondents to reconsider and process the petitioners’ claims for interest by taking into account the date of the original refund application. The High Court allowed all the writ petitions and held that the GST authorities had erred in denying interest by reckoning the date of the subsequent refund application instead of the original refund application.

Case Name:  Kuehne Nagel Pvt. Ltd. & Anr. Versus The Union of India & Ors. dated 02.07.2026

To read the complete judgement 2026 Taxo.online 1868