Delhi HC: Refund Can’t Be Withheld Without Appeal Against Appellate Order

Case Name

M/s JVG Technology Private Limited vs. Commissioner CGST, Delhi West and Anr.

(W.P.C 5757/2025 & CM APPL. 26284/2025, decided on 23rd May, 2025)

Key Takeaways

• Refunds can’t be withheld just because the department is considering an appeal: The department must actually file an appeal or have other proceedings pending to withhold a GST refund under Section 54(11) of the CGST Act, 2017.
• Interest is payable on delayed refunds: If the refund is delayed, the department must pay interest as per Section 56 of the CGST Act, 2017.
• Department’s opinion alone isn’t enough: The Commissioner’s opinion that a refund may affect revenue isn’t sufficient by itself to withhold payment; there must be a pending appeal or proceeding.
• If the department later wins an appeal, it can recover the refund: The refund is subject to the outcome of any future appeal.

Issue

Can the GST Department withhold a refund granted by the Appellate Authority solely on the basis of its own opinion, without actually filing an appeal or having any other pending proceedings against the order?

Facts

• Who’s involved?
• M/s JVG Technology Private Limited (the Petitioner), an exporter of mobile phones, and the Commissioner CGST, Delhi West (the Respondent).
• What happened?
• JVG Technology filed for GST refunds for September and October 2022, totaling about Rs. 5 crores, due to unutilized Input Tax Credit (ITC).
• The department issued show cause notices and rejected both refund claims in June 2023.
• JVG Technology appealed, and the Appellate Authority allowed the refund in December 2023, setting aside the rejection orders.
• Despite repeated requests, the department did not release the refund, claiming it was being withheld under Section 54(11) of the CGST Act, 2017, because granting the refund could harm revenue due to alleged malfeasance or fraud.
• JVG Technology filed this writ petition seeking directions for immediate refund with interest.

Arguments

Petitioner (JVG Technology)

• The Appellate Authority has already allowed the refund.
• There is no pending appeal or stay against the Appellate Authority’s order.
• The department cannot withhold the refund just based on its own opinion.

Respondent (GST Department)

• The refund is being withheld under Section 54(11) of the CGST Act, 2017.
• The department believes granting the refund could adversely affect revenue due to alleged malfeasance or fraud.
• The department claims it can withhold the refund until the final outcome of any appeal or further proceedings.

Key Legal Precedents

• Section 54(11) of the CGST Act, 2017:
• Allows the Commissioner to withhold a refund if (i) the refund order is under appeal or other proceedings, and (ii) the Commissioner believes granting the refund may adversely affect revenue due to malfeasance or fraud, after giving the taxpayer a hearing.
• Shalender Kumar v. Commissioner Central Goods and Services Tax Delhi West & Ors., W.P.© 3824/2025 (3rd April, 2025):
• The court clarified that both conditions under Section 54(11) must be met: (1) there must be a pending appeal or proceeding, and (2) the Commissioner’s opinion. The department cannot withhold a refund based solely on its opinion if no appeal or proceeding is pending.
• G.S. Industries (supra):
• The court held that unless an appeal is actually filed and a stay is granted, the refund must be processed as per the Appellate Authority’s order. The department’s intention to appeal is not enough to withhold the refund.
• Mr. Brij Mohan Mangla Vs. Union of India & Ors.: W.P.© 14234/2022 (23.02.2023):
• Reaffirmed that the benefit of an order-in-appeal cannot be denied unless there is a stay or a pending appeal.

Judgement

• Who won?
• The Petitioner, M/s JVG Technology Private Limited.
• What did the court decide?
• The Delhi High Court directed the department to release the refund along with statutory interest within two months. The court clarified that unless the department actually files an appeal against the Appellate Authority’s order, it cannot withhold the refund just based on its own opinion. If an appeal is filed later, the refund will be subject to the outcome of that appeal, and the department can recover the amount if it wins.
• Legal reasoning:
• The court relied on the plain language of Section 54(11) and previous judgments, emphasizing that both conditions (pending appeal/proceeding and the Commissioner’s opinion) must be satisfied to withhold a refund. The department’s opinion alone is not enough.

FAQs

Q1: Can the GST department withhold a refund just because it thinks there might be fraud?

A: No. The department must also have a pending appeal or other proceeding against the refund order. Its opinion alone is not enough to withhold the refund.

Q2: What happens if the department files an appeal after the refund is released?

A: If the department wins the appeal, it can recover the refunded amount from the taxpayer, as per law.

Q3: Is interest payable on delayed GST refunds?

A: Yes. If the refund is delayed, the department must pay interest as per Section 56 of the CGST Act, 2017.

Q4: What should a taxpayer do if the refund is not credited even after a court order?

A: The taxpayer can file an application with the court if the refund is not credited by the specified deadline (in this case, by 10th July 2025).

Q5: Does this judgment mean the department can never withhold refunds?

A: No. The department can withhold refunds if there is a pending appeal or proceeding and the Commissioner forms an opinion that granting the refund may harm revenue due to malfeasance or fraud. Both conditions must be met.