The Delhi High Court has made strong observations against the GST Department after finding that the authorities prima facie acted in contempt of a judicial order by rejecting a refund claim of ₹70.09 lakh despite repeated directions from the Court to release the refund along with statutory interest.

The Bench of Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul observed that the conduct of the Department appeared contrary to the clear directions issued in earlier proceedings and raised serious concerns regarding compliance with judicial orders.

The dispute originated from a refund application filed by the petitioner on 30 November 2023 in Form GST RFD-01 seeking refund of ₹70,09,455 for the period from April 2020 to March 2022. As the refund claim remained undecided, the petitioner approached the Delhi High Court through a writ petition.

On 28 March 2025, the High Court allowed the petition and directed the Department to sanction the refund within four weeks along with statutory interest. The Court had relied upon the principles laid down in the landmark judgment of Jian International v. Commissioner of Delhi Goods and Services Tax, which emphasized adherence to statutory timelines in processing GST refund claims.

Despite the clear direction, the refund was not released. Consequently, the petitioner initiated further proceedings seeking compliance of the Court’s order. During those proceedings, the Department informed the Court that the refund application had inadvertently been sent to an incorrect ward officer, resulting in delay. The Court permitted the petitioner to file a fresh application and directed the authorities to process the refund expeditiously.

However, the matter did not end there. Even after repeated hearings, the refund remained unpaid. The Department subsequently raised objections regarding alleged discrepancies in the returns filed by the petitioner and attempted to justify the withholding of the refund on that basis.

On 12 December 2025, the High Court noted that the issue concerning alleged mistakes in the returns had not been brought to the notice of the Bench when the original refund order was passed. The matter was therefore directed to be placed before the same Bench that had issued the original order.

Thereafter, on 13 February 2026, the Bench categorically held that no clarification of its earlier order dated 28 March 2025 was required. The Court observed that the writ petition had been disposed of in terms of the Jian International judgment and left it open to the petitioner to take appropriate steps for securing compliance of the order.

When the refund was still not released, the petitioner initiated contempt proceedings. During the hearing of the contempt petition, the Department assured the Court that the refund matter was under active consideration and that necessary steps would be taken to comply with the judgment and order dated 28 March 2025. Recording the assurance, the Court directed compliance within three weeks.

Instead of granting the refund, however, the GST authorities passed an order dated 24 March 2026 rejecting the refund claim altogether. The petitioner challenged the rejection and argued that the Department could not nullify a binding judicial direction by passing an administrative order contrary to the Court’s mandate.

The petitioner further contended that the issues relating to alleged shortfalls and discrepancies had already been considered during the earlier round of litigation and could not be revived to deny the refund after the Court had specifically directed its sanction.

After examining the sequence of events and the earlier orders passed in the matter, the High Court expressed serious reservations regarding the conduct of the authorities. The Court noted that despite positive directions requiring release of the refund, the Department chose to reject the claim.

The Bench held that on a plain reading of the earlier orders, the respondents appeared to have acted in disregard of the Court’s directions. The Court observed that the Department was prima facie in contempt of the order dated 28 March 2025 directing release of the refund.

While granting the respondents four weeks’ time to file their response, the Court recorded its prima facie view that the Department’s action in rejecting the refund despite repeated judicial directions warranted further examination. The petitioner was granted liberty to file a rejoinder thereafter.

The matter has now been listed for further consideration on 30 July 2026.

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