In State of Jharkhand v. BLA Infrastructure Pvt. Ltd. (order dated 9 January 2026), the Supreme Court examined the legality of a Jharkhand High Court ruling that had directed refund of GST statutory pre-deposit along with interest by invoking Section 54 of the Jharkhand GST Act, 2017. The dispute arose after the assessee succeeded in appeal and sought refund of the mandatory pre-deposit made for filing the appeal.
The State contended before the Supreme Court that such refund was not governed by Section 54, but instead by Section 107(6) read with Section 115 of the Act. The Supreme Court accepted this submission and held that the High Court’s interpretative exercise of Section 54 was unnecessary.
What the Supreme Court Held
The Supreme Court clarified three core aspects:
- Nature of Refund
The refund in question was statutory pre-deposit refund, arising out of success in appeal, and therefore relatable to Section 107(6). - Incorrect Invocation of Section 54
Since the refund did not arise from excess tax paid or mistaken payment, the High Court erred in applying Section 54, which governs general refund claims. - Interest Direction
The Court directed that the refund be made “with interest thereon in accordance with law” within four weeks.
Importantly, the Court disposed of the matter summarily, without issuing notice to the assessee, noting that no adverse effect would be caused.
Understanding Section 115: Limited and Specific Scope
Section 115 of the GST Acts reads as follows:
Where an amount paid by the appellant under Section 107(6) or Section 112(8) is required to be refunded consequent to an appellate order, interest at the rate specified under Section 56 shall be payable from the date of payment till the date of refund.
A plain reading makes it clear that:
- Section 115 does not provide a refund mechanism,
- It only governs interest on refund of statutory pre-deposit,
- It presupposes that the refund itself is otherwise due.
Thus, Section 115 is ancillary, not procedural.
Experts’ Concern: Was Section 115 Mischaracterised?
Experts have pointed out that the Supreme Court’s phrasing—“refund relatable to Section 107(6) read with Section 115”—may unintentionally blur statutory boundaries.
Their concern is not that the Court was unaware of Section 115, but that:
- Section 115 was cited as if it were a composite refund provision, whereas
- Legislatively, it only answers the question of interest, not processing, timelines, or procedure for refund.
This distinction, though technical, is critical for consistent GST administration.
What the Court Did Not Decide?
The ruling does not clarify:
- Whether a refund application is required at all for statutory pre-deposit,
- Which procedural safeguards apply if Section 54 is excluded,
- Whether timelines under Section 54 can still be borrowed administratively.
The judgment was corrective, not declaratory—it only set aside the High Court’s reliance on Section 54, without laying down a comprehensive alternative mechanism.
Correct Statutory Interpretation Post-Judgment
A harmonised reading of the GST law suggests:
- Section 107(6)
Creates the substantive right to refund of pre-deposit upon success in appeal. - Section 115
Mandates interest from the date of payment, overriding any restrictive departmental practice. - Section 54
Should not be mechanically applied to pre-deposit refunds, but may still offer procedural guidance, provided it does not dilute the statutory right under Section 107(6).
Practical and Legal Implications
For taxpayers, the ruling strengthens:
- The claim that pre-deposit refunds are automatic, and
- Interest is payable from the date of payment, not from the date of refund application.
For tax administration, the judgment signals:
- That statutory pre-deposits cannot be equated with routine refund claims, and
- Over-proceduralisation through Section 54 is legally vulnerable.
Conclusion
While the Supreme Court rightly corrected the High Court’s over-reliance on Section 54, the judgment leaves open an important interpretative gap. Section 115 should not be read as a refund-processing provision but strictly as an interest-granting provision.
Future disputes may still require authoritative clarification on the procedure and timelines for refund of statutory pre-deposits under GST—but the foundational principle is now clear: pre-deposit refunds stand on a distinct statutory footing.
