Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Del) 1284

IN THE HIGH COURT OF DELHI AT NEW DELHI
Nitin Wasudeo Sambre, Ajay Digpaul, JJ
Fair Deal Leather Suppliers – Appellant
Versus
Value Added Tax Officer – Respondent
W.P.(C) 1220/2025 | W.P.(C) 2371/2025

Advocates:
For the Appellants/Petitioners: Mukesh Gupta, Keshav Rai
For the Respondents: Abhinav Sharma, Shubham

State authorities are mandatorily required to pay interest on delayed tax refunds at the prescribed rate once the statutory limit for processing passes. Procedural failures in notification or record-keeping by the state cannot be invoked to avoid this liability, particularly when administrative delays are not attributable to the taxpayer.

Headnote:(A) Tax Legislation - Refunds and Interest - Sections 38 and 42 - Liability for interest on delayed refunds - Interest becomes payable at a statutory rate after the expiration of the 60-day period following the filing of a return - Tax authorities are obligated to pay interest when a refund is wrongfully withheld, especially if the delay in assessment is compounded by the failure of the authorities to serve proper notice or upload orders to the official digital platform. (Paras 12, 14, 44)

(B) Procedural Fairness - Requirement of Notice - Section 32 - Assessment orders passed without proper service or notification to the taxpayer remain legally vulnerable - The failure of authorities to adhere to mandatory service procedures precludes them from claiming that the delay in refund processing was solely attributable to the taxpayer's conduct. (Paras 32, 33, 38)

(C) Computation of Interest - Interest on the principal refunded amount is to be calculated at the rate of 6% simple interest per annum, commencing from the expiry of the statutory period for processing the claim until the actual date of dispersal of the funds. (Paras 41, 44, 45)

Facts of the case:
The taxpayers claimed refunds following the filing of quarterly returns in 2009. The authorities issued ex-parte assessment orders rejecting these claims without ensuring that the taxpayers were served or that the orders were accessible on the digital portal. After prolonged litigation, the matters were remanded for re-examination, resulting in the eventual sanction of the refunds in 2024. The taxpayers sought payment of interest, contending that the delay in receiving their legitimate refunds was caused by administrative failures.

Findings of Court:
The court held that the statutory mandate governing interest on withheld refunds is absolute. It found that the authorities failed to comply with procedural requirements regarding the service of orders, and therefore, the responsibility for the delay could not be shifted to the taxpayers. The entitlement to interest was established as a compensatory measure for the delayed refund.

Issues: Whether a taxpayer is entitled to claim interest on a tax refund where the processing was delayed due to administrative lapses, and whether the respondent is liable for such interest despite the extended timeline of the litigation.

Ratio Decidendi: Statutory mandates concerning refunds and interest operate on an objective timeline. Once the statutory period for processing a refund expires, the obligation to pay interest becomes automatic. Procedural neglect by the state in serving notice or transparently recording assessment orders renders the state liable for the resulting delay, and this liability persists regardless of subsequent litigation periods initiated by the taxpayer to obtain justice.

Result: Petitions allowed.

Table of Content
1. procedural consolidation and scope of interest claim. (Para 1 , 2 , 3 , 4 , 5)
2. chronological history of assessment and subsequent remand. (Para 6 , 7 , 8 , 9 , 10 , 11)
3. petitioner's right to statutory interest on delayed tax refunds. (Para 12 , 13 , 14 , 15 , 16 , 17)
4. respondent's contention on petitioner's lack of diligence/contributory delay. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25)
5. evaluation of administrative non-compliance and procedural service gaps. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40)
6. establishment of entitlement to interest on delayed vat refunds. (Para 41 , 42 , 43 , 44)
7. mandate for payment of interest within fixed timeframe. (Para 45 , 46 , 47 , 48 , 49)

JUDGMENT (ORAL)

NITIN WASUDEO SAMBRE, J.

1. Since the issue involved in both these writ petitions is identical and similar, by consent, the same are clubbed and disposed of by this common order.

2. For the sake of convenience, the factual matrix reflected in W.P.(C) 1220/2025 is considered and it is not disputed by the respective counsels that even on facts and in law, the issue involved in both these matters is identical in nature.

3. Heard.

4. The petitioner, in the backdrop of statutory mandate provided under Section 38 (3)(a)(ii) and Section 42 of the Delhi Value Added Tax Act, 2004 (hereinafter referred to as “DVAT Act, 2004”) has approached this Court seeking interest on the amount refunded for the quarter ending on 31st March 2009.

5. The exact prayer of the petitioner reads thus: -

“1. To grant interest along with compensation for delayed issue of refund as claimed in the DVAT return for the quarter ending on 31.03.2009 after a delay of more than 15 years and 6 months.”

6. The facts which are necessary for deciding the present petition are as under:

7. The petitioner is registered with the respondent and has accordingly filed the return for the quarter ending on 31st March 2009, on 26th April 2009, in which the petitioner claimed that he is entitled for refund of an amount of ₹2,87,538/-.

8. An ex-parte default assessment order came to be passed in view of statutory mandate provided under Section 32 of the DVAT Act, 2004, rejecting the claim for refund.

9. Questioning legality of the said order and also claiming that the said order was not served upon the petitioner, the petitioner approached this Court through a writ petition bearing W.P.(C) 8045/2017, wherein this Court passed an order on 11th April 2018 permitting the petitioner to take recourse to the appellate remedy while also keeping open the issue as regards the limitation.

10. For ready reference, the order dated 11th April 2018 passed by the Division Bench of this Court in W.P.(C) 8044/2017 read with W.P.(C) 8045/2017 is reproduced as under: -

“Learned counsel for the petitioners states that the petitioners were not aware and were not served with the default assessment orders dated 6.2.2012 [WP(C) No.8044/2017] and 1.9.2011 [WP(C) No. 8045/2017]. Learned counsel for the petitioners states that the said orders were not uploaded on the portal of the petitioners.

Learned counsel for the respondents disputes the said version and states that the orders were uploaded.

Be that as it may, it will be open to the petitioners to file an appeal, impugning the orders dated 6.2.2012 and 1.9.2011 in accordance with the provisions of the Delhi Value Added Tax Act, 2004 . The petitioners would be entitled to raise the contention that the orders were not uploaded on the portal and were not served on the petitioners and hence, the appeal would not be barred by limitation. In case any such contention is raised, the same would be examined by the appellate authority in accordance with law.

Recording the above, the writ petitions are disposed of.”

11. As a sequel of above, the petitioner approached before the appellate authority and the appellate authority after entertaining the appeal, remanded the matter back to the respondent no. 1 i.e.

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2026 Supreme(Online)(Del) 1284

IN THE HIGH COURT OF DELHI AT NEW DELHINitin Wasudeo Sambre, Ajay Digpaul, JJFair Deal Leather Suppliers – AppellantVersusValue Added Tax Officer – RespondentW.P.(C) 1220/2025 | W.P.(C) 2371/2025

Cases Referred (1)

IN THE HIGH COURT OF DELHI AT NEW DELHI
Nitin Wasudeo Sambre, Ajay Digpaul, JJ
Fair Deal Leather Suppliers – Appellant
Versus
Value Added Tax Officer – Respondent
W.P.(C) 1220/2025 | W.P.(C) 2371/2025