The Bombay High Court has taken a stern view of the recurring failure of the State GST department to comply with judicial directions for tax refund, observing that taxpayers are being unnecessarily forced into fresh rounds of litigation despite clear court orders and departmental circulars. 

The bench of Justice Mr. Bharat Raichandani and S. D. Vyas, Addl GP indicated that it may impose additional interest at the rate of 18% per annum on the delayed refund amount and even direct recovery of such interest from the salaries of officials responsible for the non-compliance. 

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The observations came while hearing a contempt petition filed alleging willful disobedience of the High Court’s earlier order dated 9 December 2025.

The Court had directed the State GST authorities to refund ₹7.27 crore, along with applicable interest, to the petitioner. The refund direction had been issued after taking note of an appellate authority’s order dated 21 August 2025, which had ruled in favour of the taxpayer and had not been challenged or stayed by any superior court. 

The petitioner argued that despite the clear judicial mandate and the absence of any legal impediment, the authorities had failed to release the refund even several months after the order became enforceable. According to the petitioner, no valid explanation had been offered for the continued non-compliance. 

Representing the State, the Additional Government Pleader informed the Court that the Department had filed an interim application seeking an extension of time to implement the refund order and requested that the application be heard along with the contempt petition. The Department also sought two weeks’ time to file its reply.

While granting the request for additional time, the Bench observed that no satisfactory explanation had been provided as to why the refund order passed in December 2025 had still not been implemented. The Court directed the respondents to file their reply within two weeks and listed the matter along with the pending interim application. 

The Division Bench made strong observations regarding what it described as a “growing tendency” among departmental officials to disregard court directions relating to tax refunds.

The Court noted that even after appeals filed by the Revenue are dismissed and there are no pending proceedings before any superior court, refunds are frequently withheld. It further remarked that, in several instances—including the present case—the authorities have failed to release refunds despite explicit directions from the High Court.

According to the Bench, such conduct unnecessarily compels taxpayers to approach the Court repeatedly for relief that they are already entitled to receive under the Department’s own circulars. 

Expressing serious concern over the delay, the High Court directed the respondents to explain why additional interest at the rate of 18% per annum should not be levied on the refundable amount from the date the earlier order became enforceable until the actual payment is made.

The Court further required the Department to explain why the burden of this additional interest should not be recovered from the salary and wages of the officials responsible for the delay.

The Bench also made it clear that if an adequate reply is not filed by the next hearing, it would proceed to pass appropriate consequential orders. 

The matter has been posted for 13 July 2026, when the contempt petition and the Department’s interim application will be heard together. 

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