The Goods and Services Tax Appellate Tribunal (GSTAT), Division Bench, Court No. II, has admitted an appeal filed against an order of the First Appellate Authority concerning its claim for interest on a delayed GST refund.

The bench of Tushsar Kanti Satapathy (Judicial Member) and Bijoy Bihari Mahapatra (Technical Member)  noted that system-generated intimation was already being sent to both parties and, therefore, a further notice was not considered necessary.

The central dispute before the Tribunal concerns the interpretation and application of Section 56 of the CGST Act, 2017, which provides for interest where a refund is not made within the prescribed statutory period.

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The appellant contends that interest should be calculated from the date immediately following the expiry of 60 days from the original refund application dated 18 April 2021.

The tax authorities, however, have taken the position that the relevant refund application for determining the interest period was the subsequent application filed on 14 January 2025, following an appellate order sanctioning the refund.

The distinction is significant because the two positions produce a substantial difference in the period for which interest would be payable.

The dispute has its origins in an earlier refund claim that eventually travelled to the Jharkhand High Court.

According to the GSTAT order, the appellant initially approached the High Court by way of a writ petition. Pursuant to directions issued by the High Court, the department issued a fresh Show Cause Notice bearing No. 1012324 dated 2 May 2023.

The department subsequently passed an order dated 8 June 2023, once again rejecting the refund claim.

Aggrieved by the rejection, the appellant approached the Jharkhand High Court again by filing W.P. No. 4150 of 2023. On 2 November 2023, the High Court permitted withdrawal of the writ petition while granting liberty to pursue the statutory appellate remedy under the GST law. The liberty was subject to the condition that the appeal be filed within 30 days from the date of the High Court’s order.

Following the High Court’s direction, the appellant filed an appeal against the 8 June 2023 order before the First Appellate Authority on 21 November 2023.

The First Appellate Authority ultimately allowed the appeal and sanctioned the refund through Order-in-Appeal No. 4/CGST/JSR/2025 dated 8 January 2025.

Pursuant to that order, the appellant filed another refund application on 14 January 2025 under Section 54 of the CGST Act. Importantly, the application included a claim for interest under Section 56 for the period from 17 June 2021 to 14 January 2025.

Thus, the appellant sought to link the interest entitlement to the original refund claim of April 2021 rather than treating the January 2025 application as the starting point for the statutory interest calculation.

The Adjudicating Authority sanctioned a refund of ₹1,70,12,325, comprising: IGST: ₹2,39,705; CGST: ₹83,86,310; and SGST: ₹83,86,310

However, the separate claim for interest amounting to ₹36,55,086 was rejected.

The interest component claimed consisted of: IGST interest: ₹51,500, CGST interest: ₹18,01,793, and SGST interest: ₹18,01,793

The rejection was made with reference to Section 54(5) of the CGST Act read with Rule 92 of the CGST Rules, 2017.

The appellant challenged the rejection of the interest claim by filing an appeal on 21 March 2025 under Section 107(1) of the CGST/JGST Act read with Rule 108(1) of the CGST/JGST Rules.

Before the First Appellate Authority, the appellant specifically claimed interest under Section 56.

The First Appellate Authority, however, held that the appellant was not entitled to interest under Section 56 from the date of the first refund application dated 18 April 2021.

The Authority reasoned that the relevant refund application had been filed only on 14 January 2025, pursuant to the appellate order dated 8 January 2025. On that basis, it concluded that interest could not be claimed for any period preceding the January 2025 refund application.

The appeal was accordingly disposed of against the appellant’s interest claim.

The appellant strongly contended that the statutory entitlement to interest cannot be restricted merely because the department subsequently required the taxpayer to pursue litigation before the refund was ultimately sanctioned.

The appellant maintained that interest under Section 56 should be calculated from the date immediately following the expiry of 60 days from the first refund application dated 18 April 2021.

Counsel also relied upon various judicial pronouncements in support of the claim.

The Tribunal recorded that there was no appearance on behalf of the respondent department to contest these submissions at the hearing.

Significantly, the 6 July 2026 order is not a final determination of the appellant’s entitlement to ₹36.55 lakh interest.

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