The Madras High Court has granted interim protection to a taxpayer challenging GST demand orders that treated previously approved refunds as erroneous. The court said the question of whether a refund adjudicated under Section 54 of the GST law can subsequently be brought within the “erroneous refund” provision of Section 74(1) requires close examination.

The Bench of Justice Senthilkumar Ramamoorthy passed the interim order in a batch of writ petitions challenging orders issued under Section 74 of the applicable GST enactments.

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The taxpayer argued that its refund applications had already been thoroughly adjudicated under Section 54 and the applicable rules. On that basis, it contended that the refunds could not later be characterised as erroneous and recovered through Section 74 proceedings.

Counsel for the taxpayer relied on the Madras High Court’s decision in Eveready Industries India Ltd. v. Customs, Excise & Service Tax Appellate Tribunal and a Telangana High Court decision in Qwik Power Industries India LLP v. Assistant Commissioner of Central Taxes.

The state tax authorities opposed the taxpayer’s position. Their counsel cited the Madras High Court’s Division Bench ruling in Premier Cotton Textiles v. Commissioner of Central Goods and Services Tax, submitting that it had considered Eveready Industries and relied on the Supreme Court’s decision in Grasim Industries Limited v. Commissioner of Central Excise.

The High Court observed that Sections 73(1), 74(1) and 74A(1) of the GST law include erroneous refunds within provisions for determining liability. It also noted that the decisions cited by both sides arose under the Central Excise Act, rather than GST legislation.

The court therefore said it must closely examine whether adjudication of a refund application under Section 54 places that refund outside the scope of the expression “erroneous refund” in Section 74(1). The court has not yet decided that question.

Noting that the taxpayer had approached it within the statutory period for filing an appeal, the High Court directed an interim stay of the challenged orders until the next hearing, subject to payment of 10% of the tax demand under each order. The amount may be paid from the electronic cash ledger or electronic credit ledger within two weeks of receiving a copy of the order.

The matter is listed for October 16, 2026.

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