The Telangana High Court has directed the GST Department to decide the refund of ₹1.11 crore recovered from a taxpayer’s bank account before the expiry of the statutory limitation period for filing a second appeal before the GST Appellate Tribunal (GSTAT). 

The bench of Chief Justice Aparesh Kumar Singh and Justice G. M. Mohiuddin observed that once the Department itself had re-credited the recovered amount to the taxpayer’s Electronic Cash Ledger, there should be no impediment in considering its refund to the taxpayer’s bank account. 

The dispute arose after the GST Department passed an Order-in-Original dated 24 December 2024, raising a tax demand of ₹1,11,71,740, along with applicable interest and penalty, against Phoenix Spaces (Guntur) Private Limited. The company challenged the order by filing a statutory first appeal after making the prescribed pre-deposit. The appellate authority rejected the appeal, and the summary of the appellate order in Form GST APL-04 was issued on 19 January 2026. 

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Under Section 112 of the Central Goods and Services Tax Act, 2017, the petitioner was still entitled to file a second appeal before the GST Appellate Tribunal within the prescribed limitation period, which remained available up to 30 June 2026. 

Despite the availability of the statutory appellate remedy, the Department issued a garnishee notice in Form GST DRC-13 on 13 February 2026, which was received by the petitioner’s bank on 21 February 2026. On the same day, the bank debited the entire amount of ₹1.11 crore from the petitioner’s account. The petitioner challenged the recovery as arbitrary and contrary to law, contending that the statutory period for filing the second appeal had not yet expired. 

During the hearing, the petitioner informed the Court that following earlier proceedings, the Department had re-credited the recovered amount to the petitioner’s Electronic Cash Ledger instead of refunding it directly to the bank account from which it had been recovered. According to the petitioner, this continued to adversely affect its liquidity and business operations because the funds remained unavailable for normal commercial transactions. 

The petitioner argued that if the Department itself acknowledged the impropriety of the recovery by restoring the amount to the Electronic Cash Ledger, there was no justification for withholding its refund to the original bank account. 

The High Court noted that the controversy had narrowed to a limited issue—whether the amount recovered before expiry of the appeal period should merely remain re-credited in the Electronic Cash Ledger or be refunded to the petitioner’s bank account.

The Court also observed that repeated adjournments were being sought by the Revenue to obtain instructions, despite the issue being relatively straightforward. Instead of granting further time, the Bench considered it appropriate to dispose of the writ petition by providing a practical mechanism for resolution. 

The High Court granted liberty to the petitioner to submit a refund application in respect of the amount re-credited to its Electronic Cash Ledger. It directed that if such an application is filed within one week, the Assistant Commissioner of Central Tax, Appeals-I Commissionerate, Hyderabad, shall examine and decide the application in accordance with law within one week thereafter. 

Accordingly, the writ petition was disposed of without any order as to costs, and all pending miscellaneous applications were closed. 

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