Judicial Corner:Order on delayed IGST refund interest set aside as reduction lacked reason officer to recompute strictly under sec. 56 (20.03.2026)

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Order on delayed IGST refund interest set aside as reduction lacked reason officer to recompute strictly under sec. 56 { Jindal Drugs (P.) Ltd. vs. Union of India [2026] 184 taxmann.com 350 (Bombay)}

 

Facts

  • Petitioner Jindal Drugs (P.) Ltd. filed a writ petition seeking refund of IGST along with interest for delay.
  • The Section 56 of the Central Goods and Services Tax Act, 2017 provides that interest must be paid on delayed refunds.
  • Pursuant to an earlier court direction, the tax authorities sanctioned the refund but granted interest at a reduced/nominal rate.
  • The authorities did not provide any reasoning for reducing the interest rate or deviating from the statutory provision.

Issue

Whether the tax authorities can reduce the interest payable on delayed IGST refund without giving reasons and without strictly following Section 56 of the CGST Act.

Held

  • The Bombay High Court held that the order granting reduced interest was invalid.
  • The authorities failed to provide reasons and did not follow Section 56.
  • The court set aside the order regarding interest.
  • The proper officer was directed to recompute the interest strictly under Section 56 after giving the petitioner an opportunity of hearing.