In W.P. (C) 5590/2023 – DEL HC - Delhi High Court comes to the aid of Sesame Workshop Initiatives, holds that interest is a form of compensation for the deprivation of due amounts
Justice Vibhu Bakhru & Justice Amit Mahajan [15-05-2023]

Read Order: Sesame Workshop Initiatives (India) Private Limited V. Union of India & Ors

Chahat Varma

New Delhi, June 2, 2023: The Delhi High Court has ruled in favour of Sesame Workshop Initiatives (India) Private Limited, stating that in cases where a person is denied payment that is due to him, he should be compensated.

The petitioner had filed the present petition, claiming interest on the amount of Rs. 68,37,488/- (Rs. 44,60,713/- being CGST and Rs. 23,76,775/- being IGST).

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan held that interest was essentially a compensation to a person who had been deprived of use of the amounts due to him. The bench found it relevant to examine the observations made by the Supreme Court in Union of India v. Tata Chemicals Ltd. [LQ/SC/2014/226], wherein the Supreme Court held that, “Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there-being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies.”

The bench also referred to Sandvik Asia Limited v. Commissioner of Income Tax I, Pune [LQ/SC/2006/70], wherein the Supreme Court had endorsed the principle that interest would be payable even in cases where there was no statutory provision for payment of interest.

“We are, therefore, of the view that the petitioner is entitled to interest on the sum of Rs.68,37,488/- from 01.11.2021 (considering an allowance of twenty-six days for the respondents to comply with the refund sanction order dated 04.10.2021) till the date of payment, that is, 27.04.2023,” held the court.

In so far as the rate of interest was concerned, the court held that the same was required to be compensatory, however, since the petitioner had agreed with the rate of 6% per annum, and it was also the stipulated rate of interest in the statute, the court found no reason to further examine the appropriate compensatory rate of interest.