In a recent judgment, the Delhi High Court clarified a key aspect of VAT refund interest under the Delhi Value Added Tax Act, 2004. It ruled that if the delay in granting a refund is due to the dealer’s own mistake—whether fully or partly—then that delay period will not be counted for calculating interest on the refund amount.
The judgment was delivered by a division bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta in the case titled Lithium Urban Technologies Pvt. Ltd. v. Commissioner of VAT & Anr.
Background of the Case:
The case involved Lithium Urban Technologies Pvt. Ltd., a company engaged in sustainable urban mobility services with a fleet of electric vehicles. The company had claimed a refund of ₹25,40,422 under the DVAT Act for the first quarter of the financial year 2017-18. According to Section 38(3)(a)(ii) of the DVAT Act, such refunds should ideally be processed within two months.
However, the refund was delayed, and hence the Petitioner approached the High Court seeking the refund along with interest.
The refund was ultimately processed and paid on June 8, 2023, but interest was only paid for the period between February 7, 2023, and June 8, 2023. This specific period was chosen because it was the time when the Petitioner had submitted correct bank account details, enabling the authorities to process the refund.
The Petitioner was aggrieved that no interest was paid for the period from September 2017 (when the refund became due) to February 2023. They argued that interest should be granted for the entire delay.
The VAT Department explained that the original bank details provided by the Petitioner in 2017 were incorrect. A refund cannot be processed without accurate bank information. The correct details were only submitted much later via Form DVAT-07 on February 7, 2023, which were approved on February 17, 2023.
The department referred to Explanation to Section 42(1) of the DVAT Act, which clearly states:
"If the delay in granting the refund is attributable to the said person, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which the interest is payable."
The Special Commissioner (Ward-88 Zone-VIII) issued an order on July 5, 2023, noting the following:
"It is quite clear that return for the relevant tax period was furnished on 25.07.2017 and two months expired on 25.09.2017 in terms of Section 38(3) of the DVAT Act. However, the return was furnished with incorrect bank details and the same was updated on 07.02.2023... Therefore, delay in granting the refund from 25.09.2017 to 07.02.2023 is clearly attributable to the dealer, and for the said period, he is not entitled to interest."
The total interest payable for 111 days (from February 7 to June 8, 2023) was calculated at the rate of 6%, amounting to ₹46,354.
The Court agreed with the Special Commissioner’s reasoning. The division bench held:
"In view of the Explanation to Section 42(1), since the mistake in the bank details would be attributable to the dealer, in the opinion of the Court, the Petitioner would not be entitled to any further interest."
The Court also noted that the Petitioner had not provided any communication or documents to show follow-up or correction attempts between 2017 to 2023. As a result, the Court refused to interfere with the Special Commissioner’s decision.
At the end of the hearing, the Petition was withdrawn by the Petitioner.
- Section 38(3)(a)(ii), DVAT Act, 2004: Refund should be issued within 2 months for quarterly returns.
- Section 42(1), DVAT Act: "A person entitled to a refund under this Act shall receive simple interest at the rate notified by the Government... However, if the delay is attributable to the person, that period shall be excluded."
"The period of delay caused by the dealer's own fault cannot be counted for granting interest. The law is clear—dealers must furnish correct bank details to claim refunds promptly."
As such, the petition was dismissed as withdrawn.
Appearance: Mr. Sumit K Batra, Mr. Manish Khurana, Ms. Priyanka Jindal & Mr. Siddhanth Sarwal, Advs for Petitioner; Mr. K.G. Gopalakrishnan, Ms. Nisha Mohandas, Mr. Kunwar Raj Singh, Advs. with Mr. Vinod Mann, GSTOWard 88 & Mr. Poshinder Singh, LA DTT, GNCTD
Case title: Lithium Urban Technologies Pvt. Ltd v. Commissioner Of Value Added Tax & Anr.
Case no.: W.P.(C) 4925/2023
