VAT Security Deposit Retained in GST Period is without Authority: Tripura HC Directs Refund of Transporter’s ₹12 Lakh with Interest [Read Order]

The Tripura High Court, in a recent case, has held that the retention of security deposits collected under the Tripura Value Added Tax Act, 2004 (TVAT Act), is without authority after the introduction of the Goods and Services Tax (GST) regime in July 2017.

Delivering judgment in North East Carrying Corporation Ltd. v. State of Tripura (WP(C) Nos. 36 & 37 of 2025), the Division Bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha directed the State authorities to refund ₹12 lakh deposited by the petitioner in 2013, along with 7% interest from April 2023.

The petitioner, North East Carrying Corporation Ltd, a registered transporter under the TVAT Act, had deposited ₹12 lakh as security in July 2013 to secure registration under Section 22(4) of the Act.

With the enactment of the Tripura State GST Act, 2017, the TVAT Act was repealed, effective July 1, 2017, except for certain commodities, including petroleum and alcohol. Believing that the deposit no longer had a statutory basis, the petitioner applied for a refund in April 2023.

Instead of processing the refund, the Superintendent of Taxes issued multiple show‑cause notices under Section 77 of the repealed TVAT Act, alleging irregularities in delivery permits between 2013 and 2018. The petitioner challenged these notices, arguing that they were issued only after the refund claim and that retention of the deposit was unlawful under the GST regime.

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The Court examined Section 174 of the TSGST Act, which repealed the TVAT Act, and noted that no provision under GST requires transporters to furnish security deposits. The court observed that refund provisions under Section 43 of the TVAT Act and Rule 35 of the TVAT Rules apply only to “tax,” not to “security deposits.” Therefore, authorities could not rely on those provisions to deny a refund.

The Division Bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha held that once GST came into force, the respondents had no power to retain the deposit.

The Court directed a refund of the ₹12 lakh deposit with 7% interest from 05.04.2023 (the date of the refund application) until payment, and also imposed costs of ₹20,000 on the respondents.

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