The Delhi High Court has held that the Goods and Service Tax (GST) department can withhold refund if the two conditions are satisfied.

Firstly, the refund can be held back when an order directing a refund is subject matter of a proceeding which is pending either in appeal or any other proceeding under the Act.

Secondly,  the refund can be held back when the Commissioner gives an opinion that the grant of refund is likely to adversely affect the revenue.

The bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta has observed that refund amounts are payable with interest for the delayed period for paying the refund, it would in fact be contrary to the interest of the Department itself to hold back the refund inasmuch as if any appeal is filed and the order of the Appellate Authority is reversed, then the same would also bind the Petitioner.

A show cause was issued upon the Petitioner as to why the refund claim filed by him should not be rejected on the ground that the L1 and L2 suppliers’ licences as mentioned in the show cause were cancelled. A reply was submitted by the Petitioner and an Order was passed by the Adjudicating Authority. 

This order was appealed against by the Petitioner. In the appeal, the Appellate Authority held in favour of the Petitioner and allowed the refund.

The Department decided to file a review of the Appellate Authority’s order and also gave an opinion under Section 54(11) of the CGST Act, 2017, that processing the refund now would be contrary to the interest of the revenue.

The petitioner contended that the Appellate Authority’s order has not been challenged or set aside by any forum and thus, it still stands. No order has also been passed in the Review. The opinion under Section 54(11) of the CGST Act, 2017, is invalid and the refund ought to be processed in accordance with the Order passed by Appellate Authority.

The court held that Section 54(11)cannot be relied upon on a standalone basis. In the absence of an appeal or any other proceeding pending, challenging the order of the Appellate Authority, the opinion under Section 54(11) cannot result in holding back the refund. The refund having been permitted by the Appellate Authority and no order in review having been passed, the Department cannot hold back the refund. 

Case Details

Case Title: Shalender Kumar Versus Commissioner Delhi West Cgst Commissionerate & Ors.

Case No.: W.P.(C) 3824/2025

Date: 03/04/2025

Counsel For Petitioner: Sidhant Sarwal

Counsel For Respondent: Gibran Naushad

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