Decided 24 September 2026. The Raipur Bench of GSTAT has upheld interest of ₹44,51,491 at 18% on an inverted duty structure refund of ₹90,35,671 that was later found to be erroneous. The Tribunal held that a cash refund of accumulated ITC can be an 'erroneous refund' under section 73, that the department need not first appeal or revise the refund order, and that sections 73 and 50 together create the liability to interest.
Case at a glance
| Case | Hindalco Industries Ltd. v. Commissioner, State Tax, Chhattisgarh |
| Forum | GSTAT, Raipur (Division Bench Court I) |
| Appeal No. | APL/15/RPR/2026 |
| Date of order | 24 September 2026 |
| Amounts | Refund ₹90,35,671 (credited 13.02.2019, repaid 08.11.2021); interest ₹44,51,491 |
| Key provisions | Sections 50, 54(3), 73 CGST Act; Rule 89(5) |
| Result | Taxpayer's appeal dismissed; interest upheld |
Facts of the case
Hindalco received an inverted duty structure refund of ₹90,35,671 on 13.02.2019. The department later held that, under the substituted Rule 89(5) (which excludes input services) and the Supreme Court's VKC Footsteps judgment, no positive refund was due.
In section 73 proceedings Hindalco repaid the principal through DRC-03 on 08.11.2021 but did not pay interest. The appellate authority upheld interest of ₹44,51,491.
Issue before the Tribunal
Is interest payable on an inverted duty refund later found erroneous, and must the department first challenge the refund order in appeal or revision?
What the Tribunal held
- A monetary refund of accumulated ITC under section 54(3) can be an 'erroneous refund' recoverable under section 73.
- Not invoking sections 107(2) or 108 against the refund order did not take away the department's jurisdiction under section 73 in these facts.
- Sections 73 and 50 together give statutory authority for interest on an erroneous refund. Under section 73(8), proceedings close only on payment of tax with interest. No fraud or fault is needed.
- VKC Footsteps upheld a rule already in force; it created no new retrospective liability. Rule 88B does not affect the demand.
- Interest at 18% for 999 days from 13.02.2019 to 08.11.2021 worked out to ₹44,51,491 and was upheld. Paying the principal is not an admission on law, but it settled the principal.
Practical takeaways for taxpayers
- If an inverted duty refund included input services before VKC Footsteps, expect recovery with interest from the date of credit to your bank account.
- To limit interest, repay a disputed refund as soon as the demand is clear; interest runs till repayment.
- A refund sanction order is not final protection; the department can still use section 73 within its time limit.
Frequently asked questions
Is interest payable on an erroneous GST refund?
Yes. GSTAT Raipur held sections 73 and 50 together require interest at 18% from the date the refund was credited until repayment.
Must the department appeal the refund order before recovering it?
Not necessarily. The Tribunal held section 73 is an independent power to recover erroneous refunds.
Facing a similar GST dispute?
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This summary is based on the order of the GST Appellate Tribunal, Raipur (Division Bench Court I) in Appeal No. APL/15/RPR/2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.