Pay 6% Interest on VAT Refund Delayed by Over 15 Years; Delhi HC Rejects Dept’s Blame on Dealer

The Delhi High Court has directed the Delhi Value Added Tax (DVAT) Department to pay statutory interest at the rate of 6% per annum on a VAT refund that was delayed for more than 15 years, holding that the department cannot deny interest by attributing delay to the taxpayer when statutory procedures were not properly followed. The bench of Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul has observed that once the refund itself was found to be admissible and was eventually granted, the statutory consequence of interest under Sections 38 and 42 must follow. The Court emphasized that the right to interest is not discretionary but flows directly from the statute once the refund is delayed beyond the prescribed period. The ruling came in a batch of writ petitions concerning VAT returns for the quarter ending 31 March 2009. The petitioner had filed its quarterly DVAT return on 26 April 2009, claiming a refund of ₹2.87 lakh. Under Section 38(3)(a)(ii) of the DVAT Act, 2004, such a refund was required to be processed within two months, failing which the dealer becomes entitled to interest under Section 42 of the Act. However, the refund was not granted. Instead, an ex parte default assessment order was passed in September 2011 under Section 32 of the DVAT Act, rejecting the refund claim. The dealer contended that this order was neither served nor uploaded on the DVAT portal, leaving it unaware of the rejection. When the petitioner eventually became aware of the adverse assessment, it approached the Delhi High Court in 2017. By an order dated 11 April 2018, the Court relegated the dealer to the statutory appellate remedy while keeping the issue of limitation open. Pursuant to this liberty, the petitioner filed objections before the appellate authority. In February 2024, the Objection Hearing Authority remanded the matter back to the assessing officer, observing that the claim for input tax credit and refund involved factual verification based on documentary evidence and that the dealer should be given another opportunity to produce records. Following the remand, the assessing authority passed a fresh order in August 2024 sanctioning the refund of ₹2.87 lakh, which was ultimately credited to the petitioner’s bank account only on 15 January 2025—more than 15 years after the original return was filed. The core issue before the High Court was whether the petitioner was entitled to interest for the inordinate delay in granting the refund. The dealer argued that under Sections 38 and 42 of the DVAT Act, interest becomes automatic after the expiry of 60 days from the date of filing the return, i.e., from 25 June 2009 in the present case. The tax department resisted the claim, contending that the delay was attributable to the petitioner’s own conduct, including failure to produce documents during assessment proceedings and the belated challenge to the default assessment order. According to the department, no interest should be payable where the dealer itself had contributed to the delay. Rejecting the department’s stand, the Bench noted that there was no clear material on record to show that the statutory notice under Section 32(2) of the DVAT Act was served before passing the default assessment order. The Court also observed that the rejection order did not appear to have been uploaded on the DVAT portal, which deprived the petitioner of timely knowledge of the adverse action. The High Court held that the petitioner was entitled to simple interest at 6% per annum on the refunded amount of ₹2.87 lakh with effect from 25 June 2009 until the actual date of refund, i.e., 15 January 2025. The DVAT Department was directed to compute and release the interest amount within 12 weeks. Allowing the writ petitions, the Court made it clear that allegations of intentional delay by the dealer were unsubstantiated and could not override the clear statutory mandate under the DVAT Act. Case Details Case Title: Fair Deal Leather Suppliers Versus VAT Officer Case No.: W.P.(C) 1220/2025 Date: 08/01/2026 Counsel For Petitioner: Mukesh Gupta Counsel For Respondent: Abhinav Sharma Click Here To Read Order Read More: Levy of IGST Interest, Penalty Under Customs Law: Supreme Court Issues Notice on Centre’s Plea Challenging Bombay HC Ruling

Pay 6% Interest on VAT Refund Delayed by Over 15 Years; Delhi HC Rejects Dept’s Blame on Dealer

Membership Required

Latest articles

Income Tax Dept. Grants 10-Year Registration U/s 12AB to Religious Institution, Subject to Strict Compliance Conditions [READ ORDER]

Assessment Time Limit Can’t Be Extended by Invoking General DVO Provision Where S. 50C Specifically Applies: ITAT

Unexercised ESOP Buyback Taxable as Capital Gains, Not Salary Perquisite: ITAT

Mandatory 7.5% Customs Pre-Deposit Cannot Be Waived on Grounds of Financial Hardship: Rajasthan High Court

More like this

Income Tax Dept. Grants 10-Year Registration U/s 12AB to Religious Institution, Subject to Strict Compliance Conditions [READ ORDER]

Assessment Time Limit Can’t Be Extended by Invoking General DVO Provision Where S. 50C Specifically Applies: ITAT

Unexercised ESOP Buyback Taxable as Capital Gains, Not Salary Perquisite: ITAT

About us

Company

Categories