The Delhi High Court in Gameloft Software Private Limited v. Assistant Commissioner of Central Tax, Range 152 & Anr. held that issuing deficiency memos beyond the statutory period of 15 days from the date of filing a GST refund application is impermissible and cannot be used to prejudice taxpayers. The Court reiterated that under Rule 90(2) of the CGST Rules, refund applications must be scrutinised within 15 days, and under Section 54(7) of the CGST Act, refunds must be adjudicated within 60 days of a complete application. Any delay attributable to the department, including belated deficiency memos, entitles the taxpayer to statutory interest under Section 56 for the entire period of delay. The Court emphasised that taxpayers cannot be penalised for administrative lapses of the authorities and noted that delayed GST refunds have cascading adverse effects on business operations. Accordingly, the Revenue was directed to grant a hearing, permit rectification of deficiencies, decide the refund within one month, and pay interest for the full delay caused by late issuance of the deficiency memo.
Facts:
Gameloft Software Private Limited (“the Petitioner”) paid excess Integrated Goods and Services Tax (“IGST”) totalling Rs. 1,87,84,018/- for April 2019 to June 2020 and filed refund applications in April 2022.
The Assistant Commissioner of Central Tax, Range 152 & Anr. (“the Respondent”) rejected these refund applications on July 6 and July 7, 2022, citing deficiencies; revised refund applications were filed on March 30 and 31, 2023.
The Petitioner contended that no deficiency memo was issued within the prescribed 15-day period under Rule 90(2) of the CGST Rules. Only later, on April 11, 2023, a deficiency memo was issued stating “supporting documents were incomplete,” after which the refund applications remained pending despite representations to the department.
The Respondent contended that deficiencies were genuine, and the Petitioner’s responses and documents were incomplete, causing further delay.
Aggrieved by departmental delay and non-issuance of timely deficiency memos, the Petitioner approached the High Court seeking expeditious disposal.
Issue:
Whether delay in issuing deficiency memos beyond 15 days in GST refund adjudication prejudices the assessee and entitles it to statutory interest on delayed refunds under Section 54 and 56 of the CGST Act, 2017?
Held:
The Hon’ble Delhi High Court in W.P.(C) 16315/2025 held as under:
- Observed that, refund applications must be adjudicated within 60 days of receipt of a complete application as per Section 54(7), and deficiency memos must be issued within 15 days under Rule 90(2) of the CGST Rules.
- Noted that, interest under Section 56 of the CGST Act accrues at 6% for general delays and at 9% if the refund arises from appellate proceedings, both being notified rates.
- Held that, the Petitioner may not be denied interest for the department’s delay in issuing deficiency memos and ordered the department to fix a hearing and decide the refund claim within one month.
- Further held that the delay in GST refunds has cascading adverse business impacts for taxpayers.
- Directed the Revenue Department to promptly fix a hearing, allow the Petitioner to clear any deficiencies, and pass the refund order within one month in accordance with law, while granting the Petitioner the benefit of statutory interest for the entire period of delay caused by the department’s late issuance of the deficiency memo, leaving all rights and remedies open to the parties.
Our Comments:
The Court thoroughly followed precedents from its own previous decisions, interpreting Section 54 (Refund) and Section 56 (Statutory interest), and Rule 90(2) of the CGST Rules to reinforce taxpayer rights against departmental delay. In the case of Bansal International v. Commissioner of DGST [W.P.(C) 11629/2023, ruling dated November 21, 2023] had stated that, “The proviso to Section 56 of the CGST Act expressly provides that an interest at the rate of 9% per annum would be payable from the date immediately after the expiry of sixty days from the receipt of an application, which is filed as a consequent to an order passed by the Appellate Authority, Adjudicating Authority, Appellate Tribunal or a court that has attained finality. This clearly indicates that if a person’s claim for refund is a subject matter of further proceedings, which finally culminate in orders upholding the applicant’s entitlement, and yet the payment is not made within a period of sixty days from an application filed pursuant to such orders, the person is required to be compensated at a higher rate of interest, of 9% per annum. This higher rate of interest would run from the date immediately after the expiry of sixty days of the filing of such an application– that is, the application filed pursuant to the orders of the appellate fora and not the first application.”
Similarly in G S Industries vs Commissioner of Central Tax and GST Delhi West [W.P.(C) 7485/2024 order dated May 20, 2025] the Delhi High Court held that delayed issuance of deficiency memos or delayed refund processing must result in interest payments at the rates notified for delay (6% generally, 9% if ordered by appellate authority or court). These precedents align on statutory construction and taxpayer relief.
Relevant Provisions:
Section 54(7), CGST Act, 2017:
“54. Refund of tax.—
(7) The proper officer shall issue the order under sub section (5) within sixty days from the date of receipt of application complete in all respects.”
Section 56, CGST Act, 2017:
“56. Interest on delayed refunds.—
If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub- section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax:
Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.”
Rule 90(2) of the CGST Rules, 2017
“90. Acknowledgement.-
(2) The application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer who shall, within a period of fifteen days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in terms of sub-rule (2), (3) and (4)of rule 89, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing.”
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