GST Refund Cannot Be Withheld u/s 54(11) Without Pending Appeal: Delhi HC Directs Payment with Interest [Read Order]

The High Court of Delhi, directed the Department to release the Goods and Service Tax (GST ) refund along with applicable interest, holding that it cannot be withheld under Section 54(11) of the Central Goods and Service Tax ( CGST ) Act without a pending appeal or other proceedings.

Omega QMS,petitioner-assessee,was engaged in providing technical consultancy services in Management Systems, Quality Assurance, and Product Certification in India and to foreign clients, holding GST registration no. 07ABSPG9213C1ZQ.

The refund application for FY 2019-20 amounting to ₹83,46,169 was initially rejected by the Adjudicating Authority through an Order-in-Original (OIO) dated 24th August 2021. However, the Appellate Authority, through an Order-in-Appeal (OIA) dated 20th June 2022, set aside the OIO and allowed the refund, holding that the observations regarding the petitioner-assessee being an 'intermediary' and the physical availability of goods were without merit.

Subsequently, the CGST Department decided to challenge the OIA and issued a Review Order dated 16th December 2022 under Section 54(11) of the CGST Act, expressing its intention to seek review and stating that granting the refund at this stage would be against the interest of revenue.

Based on the Review Order, Respondent No. 1 issued the impugned order dated 4th March 2025, withholding the petitioner-assessee’s refund of ₹83,46,169, which had been allowed by the Appellate Authority through the OIA dated 20th June 2022. The authority stated that the refund would remain on hold until the completion of appellate proceedings, as granting it at this stage could affect revenue. As a result, the present petition was filed.

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The grievance raised by the petitioner was that the AA’s order had neither been challenged nor set aside by any forum and, therefore, remained valid. It was also stated that no order had been passed in the review, and the opinion issued under Section 54(11) of the CGST Act, 2017, was invalid. The petitioner’s counsel argued that the refund should have been processed as per the AA’s order.

The Departmlent’s counsel, submitted that they intended to file an appeal against the OIA dated 20th June 2022 but could not proceed as the Appellate Tribunal had not yet been constituted. The petitioner’s counsel relied on the G.S. Industries decision to argue that the refund could not be withheld. However, Mr. Naushad distinguished the case, stating that it did not involve an opinion under Section 54(11).

Section 54(11) allowed the Commissioner to withhold a refund only if two conditions were met: an appeal or other proceeding was pending, and the Commissioner formed an opinion that granting the refund would adversely affect revenue.

Justice Prathiba M Singh and Justice Shail Jain held that the Department’s opinion under Section 54(11) of the CGST Act could not be used on its own to withhold the refund. Since no appeal or other proceeding had been filed against the Appellate Authority’s order and no review order had been passed, the refund could not be denied.

The Court relied on the G.S. Industries case, where it was held that refunds could not be withheld merely because the Department intended to file an appeal when no such appeal had been filed. It also referred to the Shalender Kumar decision, which followed the same principle.

The bench directed that the petitioner’s refund be processed as per the Appellate Authority’s order. It clarified that if the Department filed an appeal later, the refund would be subject to the outcome of that appeal.

The Court further ordered that the refund, along with interest under Section 56, be processed within two months and credited to the petitioner by 30th September 2025. The petition and all pending applications were disposed of.

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