Interest on delayed payment of refund is applicable after three months of receipt of application as per the statutory provisions

The Bombay High Court1 hold that if an application for refund is made, the same is required to be adjudicated within three months of receipt of the application. However, if the refund is granted after three months of receipt of the application, then the applicant would be entitled to interest on such delayed refund as a matter of right.

The interest would cover the period from the date immediately after expiry of the period of three months from the date of receipt of the application till the date of payment of the refund.

Facts of the case: -

A petition was filed by the petitioner who is engaged in the business of providing support services primarily to its foreign affiliates within the meaning of Chapter V of the Finance Act, 1994. In order to provide such services, petitioner receives various input services and avails credit for service tax paid thereon under rule 3 of the CENVAT Credit Rules, 2004.

Petitioner was not paying any service tax on the output services so exported. This resulted into accumulation of CENVAT credit of service tax paid on input services. Petitioner as provider of output services that are exported is entitled to claim refund of the credit of the service tax paid on the input services that remained unutilized.

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