The Allahabad High Court has directed the tax authorities to pay a GST refund of ₹1,10,72,753 in cash to a company that had discontinued its business, holding that there was no prohibition under the applicable Act against cash payment of an amount earlier refunded through re-credit to its electronic credit ledger.

The Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary, observed that the company was no longer carrying on business and its electronic credit ledger had consequently ceased to be functional. 

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The bench directed the department to make the cash refund within eight weeks, together with applicable interest, if any, in accordance with the Act.

The company approached the High Court under Article 226 of the Constitution, challenging an order dated May 6, 2026, insofar as it directed that ₹1,10,72,753 be refunded by re-crediting the amount as input tax credit in its electronic credit ledger.

The total refunded amount was ₹1,38,91,287. Of this, ₹1,10,72,753 had already been re-credited to the electronic credit ledger, while the remaining balance had been paid to the company.

The company’s grievance was that it had permanently discontinued its business operations and surrendered its GST registration. It therefore contended that restoring the amount as input tax credit provided no effective benefit because the credit could no longer be utilised.

The petition sought payment of the re-credited amount directly into the company’s bank account.

The company additionally challenged the denial of statutory interest on the total refunded amount of ₹1,38,91,287.

It relied on Section 56 of the Uttar Pradesh Goods and Services Tax Act, 2017, seeking interest for the period beginning after the expiry of sixty days from its initial refund application dated July 25, 2025, until the date of actual refund.

In its pleadings, the company argued that the refusal to pay the disputed amount in cash was arbitrary and contrary to the purpose of the GST refund framework and the principles of restitution. It also invoked Articles 265 and 300A of the Constitution.

These were the grounds advanced by the company; the court’s decision rested on the circumstances of the business closure, the non-functional credit ledger and the absence of a statutory prohibition against cash payment.

The High Court recorded that there was no dispute over the refund order directing re-credit of ₹1,10,72,753 as input tax credit. It also noted that this re-credit had already been made.

The decisive circumstance was that the company was no longer conducting business. As a result, its electronic credit ledger had ceased to be functional, leaving the refunded credit unavailable for practical use.

On these facts, the bench held that the provisions of the Act did not prohibit payment in cash of the amount previously directed to be re-credited to the ledger.

The court accordingly found it appropriate to direct a cash refund, particularly because the company’s business was no longer in existence.

The bench directed the concerned authorities to refund ₹1,10,72,753 in cash within eight weeks from the date of its order.

The payment must include applicable interest, if any, in accordance with the provisions of the Act. The court did not specify an interest rate or expressly grant the company’s entire claim for interest on the total refunded amount from the date sought in the petition.

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