GST Refund With Interest: Delhi HC Orders Immediate GST Refund
Release With Interest In Truth Fashion Case
M/s Truth Fashion
(Proprietor: Ms. Sadia) v. Commissioner of DGST Delhi & Ors.
(W.P.(C) 486/2025 | Order dated: 10 February 2025 | Delhi High Court)
Summary of
the Case
In a significant ruling
favoring the taxpayer, the Delhi High Court directed the immediate
release of a refund of ₹18,33,000, along with statutory interest, to M/s
Truth Fashion, rejecting the government's contention that a decision to
file an appeal was sufficient ground to withhold refund. The Court
held that Section 54(11) of the CGST Act, 2017 does not support a
blanket deferral of refund merely because the department is “intending” to
appeal.
This case reiterates the
rule that government inaction or internal decision-making cannot override a
binding appellate order, unless specifically stayed.
Factual
Background
1. Initial
Refund Rejection: M/s Truth Fashion had applied for a GST
refund of ₹18,33,000, which was initially rejected by the refund
sanctioning authority.
2. Appeal
Allowed: The taxpayer successfully challenged the rejection
before the Objection Hearing Authority (OHA), which by order dated 10
May 2024, allowed the objections and directed refund.
3. Delay
in Execution: Despite the favorable OHA order, the
refund was not released.
4. Writ
Petition No. 15886/2024: The petitioner approached the Delhi
High Court through an earlier writ petition. The Court on 18 November 2024
directed the department to dispose of the refund claim expeditiously within
three weeks, recording the department’s own assurance of early action.
5. Still
No Refund Disbursed: Even after the High Court’s order, the
refund was not processed, compelling the petitioner to file a second
writ petition—W.P.(C) 486/2025.
Reliefs Sought in W.P.(C)
486/2025
The petitioner sought:
- Immediate release of the ₹18,33,000
refund, in terms of the appellate order and
the previous High Court direction;
- Interest under Section 56 of the
CGST/DGST Act, for the delay in releasing the
sanctioned refund.
Respondent’s Defense
The department contended:
- The Commissioner had decided to
file an appeal against the OHA’s order dated 10 May 2024.
- Therefore, under Section 54(11)
of the CGST Act, the refund could be withheld pending such appeal.
Legal Provision Cited –
Section 54(11), CGST Act
“Where an order giving
rise to a refund is the subject matter of an appeal or further proceedings or
where any other proceedings under this Act is pending and the Commissioner is
of the opinion that grant of such refund is likely to adversely affect the revenue…
he may, after giving the taxable person an opportunity of being heard, withhold
the refund till such time as he may determine.”
Court’s
Observations and Reasoning
1. Intention to File
Appeal Is Not “Subject Matter of Appeal”
The Court decisively
held:
“A mere decision to
prefer or institute an appeal would not qualify as the refund being the
‘subject matter of an appeal’ under Section 54(11).”
Hence, unless an appeal
has actually been filed and is pending, Section 54(11) cannot be
invoked to delay refunds.
2. No Automatic Stay from
Internal Appeal Decision
The Bench reiterated a
crucial principle:
“A decision taken by the
Commissioner to assail an order cannot ipso facto or automatically result in
the principal order being placed in abeyance.”
In other words, the
mere administrative intent to challenge an appellate order does not operate
as a legal stay.
3. Reliance on Alex Tour
& Travel (P) Ltd. v. Commr. (CGST)
The Court placed strong
reliance on the judgment in Alex Tour & Travel (P) Ltd. v. Commr. (CGST)
[2023 SCC OnLine Del 2709], where it was held:
- Refunds sanctioned by the appellate
authority must be honored, unless:
- A formal appeal is filed, and
- A stay is granted by a
competent forum.
“The Revenue cannot
refuse to comply with the appellate orders on the ground that it proposes to
appeal the said order.”
4. Refund Cannot Be
Withheld Indefinitely
The Court noted that:
- There was no stay order passed
against the appellate decision;
- The respondents did not take steps
to obtain one;
- Refund was not released even
months after direction by both the OHA and the High Court.
Final
Judgment and Directions
1. Writ
Petition Allowed: The High Court allowed the petition
in full.
2. Refund
Directed: The respondents were commanded to release the
refund of ₹18,33,000 forthwith.
3. Interest
Ordered: The Court also ordered statutory interest
under Section 56 of the CGST/DGST Act to be paid to the petitioner.
4. Right
to Appeal Preserved: The respondents were not precluded
from filing an appeal against the OHA’s order, provided it is:
o Filed
legally; and
o Backed
by a stay, if they wish to withhold the refund in future.
Conclusion
The Delhi High Court’s
decision in Truth Fashion v. Commissioner, DGST Delhi ensures that taxpayers
are not unfairly denied their rightful refunds under GST law. It clearly
lays down that Section 54(11) cannot be misused to delay refunds where no
appeal has been filed or no stay is in force.
This ruling upholds the
sanctity of appellate decisions and discourages administrative lethargy,
especially when it prejudices the rights of small and medium businesses like Truth
Fashion.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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