Interest on GST Refund Accrues from Date of Initial Application if Subsequent Refiling Follows Court Intervention

The petitioners filed an original refund application on 14.10.2023

The respondent authorities initially refused to accept/process the application, leading the petitioners to file a writ petition (SCA No. 12151 of 2025). On 06.11.2025, the High Court set aside the respondents' refusal and directed them to process the refund claim

Following this order, the petitioners submitted a fresh application on 11.11.2025

The respondents sanctioned the principal refund amount of Rs. 2,29,32,535/- but rejected the interest claim of Rs. 29,51,700/-, arguing that the conditions for interest under Section 56 of the CGST Act were not met, as they calculated the timeline from the subsequent application date rather than the original 2023 filing

Whether the date for calculating interest on a delayed refund under Section 56 of the CGST Act should be the date of the initial application (14.10.2023) or the date of the subsequent application (11.11.2025) filed after judicial intervention.

Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act), which provides for interest on delayed refunds if the amount is not refunded within sixty days from the date of receipt of the application

The principle of judicial restitution, emphasizing that when a prior administrative action—refusing to process a refund—is declared illegal by a court, the state cannot benefit from its own wrong by resetting the limitation period for interest

the initial action of the respondents in refusing to process the refund application dated 14.10.2023 was held to be illegal in the previous round of litigation (SCA No. 12151 of 2025), that original date must be preserved for statutory benefits

The "Proper Officer" had erroneously construed the subsequent filing on 11.11.2025 as a fresh start-point for the accrual of interest

The court held that because the original denial was set aside, the subsequent application merely satisfied procedural requirements following the court's mandate, and thus, the claim for interest must relate back to the date of the earlier application to satisfy the intent of Section 56

The Court held that the interest under Section 56 of the CGST Act must be processed by considering the date of the initial application (14.10.2023)

The respondents were directed to pass necessary orders on the claim of interest within twelve weeks from the date of receipt of the order. Rule was made absolute with no order as to costs