GST ITC Refund Withheld Without Challenging Appellate Order: Delhi HC Directs Department to Release Refund with Interest [Read Order]
The Court stated that merely intending to file an appeal or the Department’s opinion was insufficient to withhold the refund under Section 54(11) of the CGST Act, 2017
GST ITC refund – Delhi HC GST case – ITC refund interest – Taxscan
GST ITC refund – Delhi HC GST case – ITC refund interest – Taxscan
The Delhi High Court directed the Department to release the Goods and Service Tax (GST) Input Tax Credit (ITC) refund with interest, ruling that the refund could not be lawfully withheld since no appeal or stay was filed against the Appellate Authority (AA) ’s order allowing the refund.
JVG Technology Private Limited,petitioner-assessee,was engaged in exporting mobile phones and registered under Goods and Service Tax(GST) with registration no. 07AAFCJ6874R1ZL. It purchased input services for domestic sales and paid GST at 18%. The petitioner usually had unutilized ITC.
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The petitioner filed refund claims for Rs. 2.03 crore for September 2022 and Rs. 2.98 crore for October 2022. Two Show Cause Notices were issued on 29th May 2023, and the petitioner replied online. Despite this, the refund claims were rejected on 26th June 2023 by the Assistant Commissioner.
The petitioner appealed, and the AA allowed the refund on 11th December 2023, setting aside the earlier rejection orders. After the order, the petitioner made several requests for the refund, but it was not released. Hence, the petitioner filed the present petition.
The Department withheld the refund by invoking Section 54(11) of the CGST Act, 2017, stating that the refund could not be processed until the appeal against the AA’s order dated 11th December 2023 was decided or the appeal proceedings concluded. The Department claimed that granting the refund would harm revenue due to alleged fraud.
However, the Court referred to its earlier decision in Shalender Kumar v. Commissioner CGST, where it had clarified that a refund could only be withheld under Section 54(11) if two conditions were met: (i) an appeal or proceeding was actually pending against the refund order, and (ii) the Commissioner believed that releasing the refund would adversely affect revenue.
The Court stated that the Department’s opinion alone was not enough to stop the refund. Since no appeal had been filed against the AA’s order and there was no stay, the Department could not lawfully withhold the refund.
The Court also relied on the case of G.S. Industries, where it was held that merely planning to file an appeal could not justify delaying the refund, especially when the refund was already allowed on appeal.
Read More: Filing ITC Refund within Time prescribed u/s 54(1) of CGST Act: Delhi HC directs to Process Refund
Accordingly, the Court directed the Department to release the refund with interest under Section 56 of the CGST Act within two months. It also clarified that if the Department later succeeded in any legal challenge, it could recover the refunded amount as per law. The petitioner was permitted to file an application if the refund was not credited by 10th July 2025.
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Justice Prathiba M.Singh and Justice Rajneesh Kumar Gupta held that if the Department filed an appeal challenging the AA's order, the processing of the refund would be subject to the outcome of that appeal.
The petition was accordingly disposed of.
To Read the full text of the Order CLICK HERE
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