Delhi HC directs GST Dept for Quick Processing of Unutilized ITC Refund

M.D. Securities Private Limited Vs Sales Tax Officer Class II Avato & Ors (Delhi High Court)

Delhi High Court has expressed concern over significant delays in the processing and disbursement of accumulated unutilized Input Tax Credit (ITC) refunds for M.D. Securities Private Limited, directing the Department to expedite the process. The petitioner is seeking a total refund of over Rs. 106 crore across multiple periods, alleging deliberate delays by the tax authorities at various stages.

M.D. Securities Private Limited filed a petition under Article 226 of the Constitution of India, seeking the refund of unutilized ITC for the periods of October 2024, November 2024, December 2024 – January 2025, and February 2025. The company highlighted substantial delays in the issuance of acknowledgements (RFD-02) and the final refund orders. For instance, the refund for October 2024, filed on November 22, 2024, showed a 99-day delay against the 60-day outer timeline for refund order issuance. Similarly, November 2024’s refund had a 67-day delay. Alarmingly, for December 2024 – January 2025 and February 2025, the RFD-02 acknowledgements had not been issued at all, despite statutory deadlines passing.

Counsel for the petitioner, Mr. Kishore Kunal, argued that the Department deliberately delayed the refund process at two critical stages:

1. Issuance of Acknowledgement: Under Rule 90 of the Central Goods and Services Tax Rules, 2017 (CGST Rules), acknowledgement (RFD-02) must be issued within 15 days of filing the refund application.

2. Issuance of Refund Order: Section 54(7) of the Central Goods and Services Tax Act, 2017 (CGST Act) mandates the issuance of the refund order within 60 days from the date of acknowledgement.

Mr. Kunal relied on the Delhi High Court’s own decision in Jian International vs. Commissioner of Delhi Goods and Services Tax, 2020 (39) GSTL 385 (Del). In that case, the court provided a clear interpretation of Rules 90 and 91 of the CGST/DGST Rules, stating they constitute a complete code for acknowledgement, scrutiny, and grant of refund, with strict timelines. The Jian International judgment explicitly held that if no deficiency memo (FORM GST RFD-03) is issued within the 15-day period stipulated by Rule 90(2) and (3), then the refund application is presumed to be complete in all respects. The court in Jian International further ruled that the authorities lose the right to point out deficiencies at a belated stage, as doing so would delay the refund and impair the applicant’s right to claim interest from the original filing date as per Section 56 of the CGST/DGST Act. That judgment directed the respondent to pay the refund with interest within two weeks.

Building on this precedent, the petitioner’s counsel contended that the entire accumulated ITC amount should be refunded immediately, along with interest. He also suggested that if further delays occur, the Department should be liable to pay a higher rate of interest, akin to the interest charged from assessees under Section 50(1) of the CGST Act.

Counsel for the respondents, Mr. Batra, sought instructions on the matter, informing the court that the refund processing was reportedly already underway.

The Delhi High Court issued a directive for the refund to be processed “in accordance with law” and credited to M.D. Securities’ account by the next hearing date (May 28, 2025). The court sternly noted that should the refund not be processed, it would consider passing “appropriate directions” regarding the refund and the applicable rate of interest, referencing the scheme of the CGST Act. The case has been listed for further hearing, underscoring the court’s intent to monitor the expeditious resolution of the refund claims.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. This hearing has been done through hybrid mode.

2. The present petition has been filed by the Petitioner- M.D. Securities Private Limited under Article 226 of the Constitution of India, inter alia, seeking refund of accumulated unutilised Input Tax Credit (hereinafter, ‘ITC’) of the following amounts:

3. The submission of Mr. Kishore Kunal, ld. Counsel appearing for the Petitioner is that the Department has deliberately delayed the refund sought by the Petitioner at the following stages:

i. At the stage of issuance of acknowledgement which has to be done within 15 days of filing of the application in terms of Rule 90 of the Central Goods and Services Tax Rules, 2017 (hereinafter, ‘CGST Rules’).

ii. Issuance of refund within 60 days from the date of issuance of acknowledgement in terms of Section 54(7) of the Central Goods and Services Tax Act, 2017 (hereinafter, ‘CGST Act’).

4. Ld. Counsel for the Petitioner relies upon the decision in Jian International vs. Commissioner of Delhi Goods and Services Tax, 2020 (39) GSTL 385 (Del) to argue that if no deficiency memo is issued within the period of 15 days in terms of the Scheme of Rule 90 of the CGST Rules, then after the expiry of the period of 15 days within which acknowledgment is to be issued, no deficiency memo can even be raised. The relevant portion of the said judgment reads as under:-

“6. Having heard Learned Counsel for the parties, this Court finds that Rules 90 and 91 of CGST/DGST Rules provide a complete code with regard to acknowledgement, scrutiny and grant of refund. The said Rules also provide a strict timeline for carrying out the aforesaid activities. For instance, Rules 90(2) and (3) of the DGST Rules states that within fifteen days from the date of filing of the refund application, the respondent has to either point out discrepancy/deficiency in FORM GST RFD-03 or acknowledge the refund application in FORM GSTRFD-02. In the event deficiencies are noted and communicated to the applicant, then the applicant would have to file a fresh refund application after rectifying the deficiencies. The relevant portion of Rule 90 of CGST/DGST Rules is reproduced hereinbelow :

…

7. In the event of default or inaction to carry out the said activities within the stipulated period, consequences like payment of interest are stipulated in Section 56 of CGST/DGST Act.

8. Admittedly, till date the petitioner’s refund application dated 4th November, 2019 has not been processed. As neither any acknowledgment in FORM GST RFD-02 has been issued nor any deficiency memo has been issued in RFD-03 within timeline of fifteen days, the refund application would be presumed to be complete in all respects in accordance with sub-rule (2), (3) and (4) of Rule 89 of CGST/DGST Rules.

9. To allow the respondent to issue a deficiency memo today would amount to enabling the Respondent to process the refund application beyond the statutory timelines as provided under Rule 90 of the CGST Rules, referred above. This could then also be construed as rejection of the petitioner’s initial application for refund as the petitioner would thereafter have to file a fresh refund application after rectifying the alleged deficiencies. This would not only delay the petitioner’s right to seek refund, but also impair petitioner’s right to claim interest from the relevant date of filing of the original application for refund as provided under the Rules.

10. Moreover, the respondent’s prayer to raise a deficiency memo is a hyper-technical plea as admittedly, all the relevant documents have been annexed with the present writ petition and the respondent is satisfied about their authenticity.

11. Consequently, this Court is of the view that the respondent has lost the right to point out any deficiency, in the petitioner’s refund application, at this belated stage.

12. Accordingly, this Court directs the respondent to pay to the petitioner the refund along with interest in accordance with law within two weeks.”

5. It is, therefore, the submission of the ld. Counsel for the Petitioner that the entire amount deserves to be refunded to the Petitioner along with interest immediately, failing which the Department ought to pay a higher rate of interest as is charged from Assessees in terms of Section 50(1) of the CGST Act.

6. Batra, ld. Counsel for the Respondents submits that he wishes to seek instructions in the matter. Ld. Counsel further submits that he has been informed that the process of refund is already underway.

7. Accordingly, it is directed that the refund shall be processed in accordance with law and the same be credited to the Petitioner’s account by the next date of hearing, failing which in terms of the Scheme of the CGST Act, this Court would consider passing appropriate directions on the next date of hearing in respect of refund and rate of interest.

8. List on 28^thMay, 2025.