Department Can't Withhold Refund In Terms Of S.54(11) GST Act Unless Appeal Against Refund Order Is Filed: Delhi High Court
The Delhi High Court has made it clear that the power to withhold refund under Section 54(11) of the Central Goods and Service Tax Act 2017 cannot be exercised by the Department in absence of an appeal against the refund order.
The provision stipulates that where an order giving rise to a refund is the subject matter of an appeal and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue, he may withhold the refund after giving an opportunity of hearing to the taxable person.
A division bench of Justices Prathiba M. Singh and Shail Jain thus observed that refund can be held back on the satisfaction of the two conditions –
"(i) when an order directing a refund is subject matter of a proceeding which is pending either in appeal or any other proceeding under the Act; and
(ii) thereafter the Commissioner gives an opinion that the grant of refund is likely to adversely affect the revenue."
In the present case, Petitioner's application for refund of Rs. 83,46,169/- for the period FY 2019-20 was initially rejected by the Adjudicating Authority. However, the Appellate Authority set aside that order and granted the refund to the Petitioner.
Thereafter, the GST Department decided to file a review against the Appellate Authority's order and consequently gave an opinion under Section 54(11) stating that the processing the refund now would be contrary to the interest of the revenue.
The Petitioner argued that the Appellate Authority's order was not challenged or set aside by any forum and thus, it still stands. It further submitted that since no order was passed in the Review, the opinion under Section 54(11) is invalid.
Counsel appearing for the Revenue submitted that the Department intends to file an appeal however, since there is no Appellate Tribunal as on date, the appeal has not been filed.
The High Court observed that the Department's opinion under Section 54(11) of the Act cannot be relied upon on a standalone basis.
“In the absence of an appeal or any other proceeding pending, challenging the order of the Appellate Authority, the opinion under Section 54(11) of the Act cannot result in holding back the refund,” it said.
The refund having been permitted by the Appellate Authority and no Order in Review having been passed, the Court said the Department cannot hold back the refund.
Appearance: Mr. Puneet Agrawal, Mr. Ketan Jain, Ms. Sakshi Bisht, Mr. Chetan Kumar Shukla, Mr. Yuvraj Singh and Ms. Mansi Khurana, Advs. for Petitioner; Mr. Gibran Naushad, Sr. Standing Counsel with Mr. Harsh Singhal and Mr. Suraj Shekhar Singh, Advs. for Respondent
Case title: Omega QMS v. Commissioner, CGST, Delhi West & Anr.
Case no.: W.P.(C) 11815/2025