Deficiency Memo Can’t be Issued Beyond the Specified Period of 15 Days from Date of Filing of Refund Application

Held by Hon’ble Delhi High Court 

In the matter of

M/s Gameloft Software Private Limited Vs Assistant commissioner of Central Tax, Range 152

(W.P.(C) 16315/2025 & CMAPPL. 66751/2025)

The Petitioner paid the excess amount of IGST during the period of April to June, 2020 of INR 1.87 Crores. The refund application was filed in April, 2022 but the same got rejected in July, 2022. Revised application was filed on 30th March, 2023 and no deficiencies memo was issued in 15 days. However, a deficiency memo was issued later on merely stating that the “supporting documents were incomplete”. Thereafter, representations have been written by the Petitioner but to no avail and the refund applications continued to remain pending.

Hon’ble High Court relied on his own judgment in the case of ‘MS G S Industries v. Commissioner of Central Tax and GST Delhi West’ and Bansal International v. Commissioner of DGST (W.P.(C) 11629/2023 wherein it was held the refund applications have to be dealt with in a particular manner within the prescribed timelines as per law. 

Further, As per Section 56 of the Act, interest is provided to the applicant in following manner:

1. 6%: For the period immediately after expiry of 60 days from the date of filing of refund application.
2. 9%: For the period immediately after the expiry of 60 days from the receipt of an application where refund application is filed as a consequence to an order passed by the Appellate Authority, Adjudicating Authority, Appellate Tribunal or a court that has attained finality. 

Therefore, the Petitioner cannot be denied the benefit of interest for delay caused due to the deficiency memo not having been issued within 15 days. Accordingly, the respondent can’t issue a deficiency memo after 15 days and The Petitioner shall appear before the Department either physically or virtually and the refund orders shall be passed within a period of one month in accordance with law after clearing the deficiencies, if any. 

1. Brief Facts of the case:

• The Petitioner paid the excess amount of Integrated Goods and Services Tax (‘IGST’) during the period of April, 2019 to June, 2020 of INR 1.87 Crores.

• The Refund application with respect to the same was filed in April, 2022 but were rejected vide orders dated 6th July, 2022 and 7th July, 2022 citing certain deficiencies. 

• Revised refund applications were filed on 30th March, 2023 and 31st March, 2023 and no deficiency memo was issued within 15 days.

• However, a deficiency memo was issued on 11th April, 2023 merely stating that the “supporting documents were incomplete”.

• Thereafter, representations have been written by the Petitioner but to no avail and the refund applications continued to remain pending.

2. Relevant Legal Extract

Relevant Provisions of the GST Law is reiterated below for ready reference:

1. Section 54 of the CGST Act:

“54. Refund of tax.— 

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: 

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.

….

(5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.

…

(7) The proper officer shall issue the order under subsection (5) within sixty days from the date of receipt of application complete in all respects.”

2. Section 56 of the CGST Act

“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:

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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.

3. Issue Before Hon’ble High Court

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?

4. Findings and Analysis by Hon’ble High Court

Hon’ble High Court made following findings and analysis:

• As per the statutorily prescribed procedure, the refund applications have to be dealt with in a particular manner within the prescribed timelines as per law. 

• The scheme of the Act and Rules has been analysed by this Court in W.P. (C) 7485/2024 titled ‘MS G S Industries v. Commissioner of Central Tax and GST Delhi West’. In such decision, following analysis were made:
  
  • The provisions that are relevant in determining the interest on delayed refunds are covered by Section 54 and 56 of the CGST Act.

• If, on receipt of the refund application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.

• The entire scheme for grant of refunds under CGST Act has been considered by this Court in Bansal International v. Commissioner of DGST (W.P.(C) 11629/2023, wherein it was held that:

• Rate of interest specified in the main provision of Section 56 of the CGST Act and the proviso to Section 56 of the CGST Act is materially different. 

• The main provision of Section 56 of the Act provides for an interest at the rate 6% p.a., the proviso stipulates interest at the rate of 9% p.a.

• Thus, there are two separate rates of interest specified under Section 56 of the CGST Act:
  
  • 6%: For the period commencing from a date immediately after expiry of 60 days from the date of filing of refund application.
  • 9%: For the period from the date immediately after the expiry of sixty days from the receipt of an application, which is filed as a consequence to an order passed by the Appellate Authority, Adjudicating Authority, Appellate Tribunal or a court that has attained finality. 

• Therefore, if a refund claim 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 60 days from date of application filed in pursuant to such orders, the person is required to be compensated with interest at the rate of 9% p.a.

• This higher rate of interest would run from the date immediately after the expiry of 60 days of the filing of application filed in pursuant of the orders of the appellate fora and not the first application.

• However, this does not mean Interest at rate of 6% is not payable for the period commencing from the date immediately after expiry of 60 days from filing of first application till 60 Days immediately after filing of refund application pursuant to the appellate orders. 

• Therefore, proviso merely enhances the rate of interest payable to a person.

• The stand of ld. Counsel for the Petitioner is that the deficiency memo was not issued within 15 days in terms of Rule 90 of the CGST Act. Hence, the interest is liable to be granted for the entire period.

• Whereas, the department contended that the deficiencies were genuine and they were cleared only after two months.

• Therefore, This Court is of the view that the Petitioner cannot be denied the benefit of interest for delay caused due to the deficiency memo not having been issued within 15 days.

• Further, delay by the Department in processing and granting refunds has a cascading adverse effect on the business of the tax payers as well. 

• Therefore, the Court is of the opinion that the Respondent ought to take a decision expeditiously on the refund applications.

5. Final Order

Hon’ble High court Held that:

• The Petitioner shall appear before the Department on 10th November, 2025 either physically or virtually as may be communicated to the Petitioner. 

• If there are any deficiencies which have already been pointed out, the same shall be cleared by the Petitioner and the refund orders shall be passed within a period of one month in accordance with law.