Supreme Court Allows ₹2.9 Crore GST Refund On Coal To SAIL, Rejects Revenue Challenge

The Supreme Court on 23 January 2026 dismissed a Special Leave Petition filed by the Revenue, challenging a refund of about Rs. 2.9 crore granted to the Steel Authority of India's (SAIL) Bokaro plant in the initial years of the GST rollout.

A Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan upheld a decision of the Jharkhand High Court that allowed the refund of unutilised Input Tax Credit (ITC) of Compensation Cess on coal, despite a gross delay of 676 days. The Bench observed it found “no good reason to interfere with the impugned order passed by the High Court."

The dispute arose from the denial of a sanctioned refund to SAIL's Bokaro plant for coal used during July 2017 to March 2018. Coal is a raw material used in iron and steel manufacturing. A compensation cess levied on coal can only be set off against itself and not towards CGST, SGST, or IGST liability. However, in case of exports, any excess ITC available on compensation cess can be claimed as a refund under Section 16 read with Section 54 of the CGST Act.

SAIL's refund status initially reflected as “sanctioned” in 2019, but payment was not released. After about two and a half years, it was informed that the refund had been rejected.

The Jharkhand High Court had noted that no show-cause notice was issued to the petitioner and that the refund was communicated as rejected only after 30 months of the original application. The Court emphasised the procedural requirements under Rule 93(3) of the CGST Rules, 2017, stating that the "issuance of notice under Rule 92(3) is not a mere formality."

Rejecting the Department's demand to file a fresh refund application, the High Court had directed the authorities to process the refund on the original application with interest at 6% from the date of receipt of the refund application until the payment of the refundable amount. It clarified that requiring a taxpayer to submit a fresh application would deprive it of statutory interest under Section 56 of the CGST Act, 2017.

The Department challenged the interest component through a Special Leave Petition (SLP).

The Supreme Court disposed of the SLP, clarifying that the “the question of law, as regards the interest, is kept open."