Introduction
The Delhi High Court recently directed the GST department to process a delayed refund of ₹10.65 lakh plus statutory interest. This ruling—driven by misplaced administrative procedures—underscores the importance of adhering to statutory timelines and protecting taxpayers’ rights. At Manika TaxWise, we break down the case, its legal implications, and offer actionable guidance for GST-registered businesses and CA practitioners.
1. 🧭 Case Background
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Petitioner: Sisla Laboratories (GST refund applicant); filed refund claims in May–June 2019
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Claimed amounts: ₹9.59 lakh (July 2017–March 2018) and ₹10.65 lakh (June 2018–March 2019)
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Despite reminders in 2023, refunds were not processed
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The department later admitted that a deficiency memo was issued for ₹10.65 lakh but the record was lost
2. 🕒 Statutory Timeline Under CGST Act
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Section 54: Refund claims to be filed within two years from “relevant date” unless the amount is under ₹2 lakh
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Rule 90(2)/(3): On refund application, the department must either acknowledge (Form GST RFD‑02) or issue deficiency memo (RFD‑03) within 15 days
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Section 56: Mandates interest on delayed refunds after 60 days of acknowledgment
3. 🔍 What Went Wrong?
A. Lost Deficiency Memo
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The deficiency memo for the ₹10.65 lakh claim was “lost.”
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Consequently, the petitioner never cleared the deficiency, and the refund lingered unresolved
B. No Timely Acknowledgment
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Rule 90 violation: failure to act within 15 days implied deemed completeness, triggering entitlement
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The department could not later use a belated memo to stall further
4. 👩⚖️ Court’s Observations
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No valid grounds existed to withhold the ₹10.65 lakh refund
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Interest is mandatory under Section 56 due to unjustified delay
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For the first application (₹9.59 lakh), though pending, lack of portal upload and hearing posed procedural failings
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Bench: Justice Prathiba M. Singh & Justice Rajneesh K. Gupta
5. ⚖️ Delhi HC’s Directives
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Issue waiver of deficiencies and process the ₹10.65 lakh refund promptly
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Calculate and disburse statutory interest from the acknowledgment date until real payment
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Grant Sisla Laboratories one month to appeal ₹9.59 lakh application under Section 107—with full merit hearing
6. 📈 Broader Legal & Practical Implications
| Aspect | What Taxpayers & Professionals Must Know |
|---|---|
| Timelines Matter | Departments must act within 15 + 60 days, or consequences apply |
| Deficiency Memos | If delayed beyond 15 days, deemed complete – cannot later be used to stall |
| Lost Records | Administrative misplacement ≠ valid cause |
| Interest Claims | Court consistently orders full interest – see MSGS Industries case (6% + 9%) |
| Appeal Rights | Taxpayers may still appeal rejected claims even post timelines |
7. ✍️ Real Examples
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MSGS Industries (Delhi HC, May 2025): Petitioners filed 2019 refund with memo issued late, returned interest at 6% & 9% p.a., adjusted for taxpayer delay
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M/S Truth Fashion (Delhi HC Nov 2024): HC ordered refund and interest despite department's appeal plans LinkedIn
8. ✅ Practical Tips for Taxpayers & Professionals
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⚠️ Track Refunds: Monitor refund status regularly on the GST portal.
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⏱️ Know Your Timelines: 15-day deficiency window; 60-day processing window.
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🧭 Respond Promptly: Rectify deficiencies immediately upon memo.
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📂 Keep Records: Maintain portal screenshots, ACKs, and communication logs.
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👩💼 Consult Early: Engage a CA or GST expert if delays cross 60 days. Prompt writ petitions can help.
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💸 Claim Interest: Always compute interest under Section 56 when refunds are delayed.
Conclusion
Delhi HC’s decision is a strong precedent safeguarding taxpayer rights under GST. Administrative lapses—late or lost deficiency memos, missing acknowledgments—no longer excuse withholding refunds. Statutory timelines must be respected, and taxpayers are entitled to full interest for delay. At Manika TaxWise, we reaffirm that being proactive—tracking applications, timely responding, and leveraging legal remedies—can transform GST refund hassles into smooth recoveries.
FAQs
Q1: What if the GST Dept loses a deficiency memo?
You can argue the window for deficiency issuance expired; refund should be processed with interest.
Q2: When does interest start on delayed GST refunds?
Interest accrues from the 61st day after acknowledgment under Section 54, as per Section 56.
Q3: Can a deficiency memo be issued after 15 days?
No—any memo issued after Rule 90’s 15-day window is invalid; acknowledgment deemed implied
Q4: What rate of interest applies?
Generally 6% p.a.; can increase to 9% in certain appellate contexts (MSGS Industries ruling) .
Q5: Can taxpayers enforce refund orders if contested?
Yes—through writ petitions in High Court, even if department files appellate intent (e.g., Truth Fashion)
Q6: How long after filing must GST refund be processed?
Within 60 days of acknowledgment, barring valid deficiency issues.
Keywords
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Delhi HC GST refund ₹10.65 lakh
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GST deficiency memo lost
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GST refund interest Delhi High Court
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Section 56 CGST Act interest
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GST refund timelines
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Rule 90 GST deficiency
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Sisla Laboratories refund case