The Allahabad High Court has held that where an assessee has permanently discontinued its business and its Electronic Credit Ledger is no longer functional, an amount ordered to be re-credited as Input Tax Credit (ITC) cannot be left stranded in the electronic ledger.
The bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary directed the GST authorities to make the refund of ₹1,10,72,753 in cash, along with applicable interest, instead of merely re-crediting the amount as ITC.
The petitioner/assessee challenged this direction on the ground that it had permanently discontinued its business operations and surrendered its GST registration. Consequently, the amount credited to the Electronic Credit Ledger could not actually be utilised for payment of future GST liabilities. The petitioner therefore contended that such a refund would provide no real or substantive benefit.
Buy Now: 130 GST Judgments – E-Magazine July 2026
The petition also challenged the denial of statutory interest on the refunded amount of ₹1,38,91,287, claiming interest under Section 56 of the UPGST Act, 2017 after expiry of 60 days from the filing of the initial refund application dated July 25, 2025.
The High Court noted that there was no dispute regarding the manner in which the refund had been processed under the impugned order.
Out of the total refund amount of ₹1,38,91,287, an amount of ₹1,10,72,753 had already been issued through re-credit as ITC in the Electronic Credit Ledger, while the remaining balance had been paid to the petitioner in cash.
The crucial factual circumstance was that the petitioner was no longer carrying on business. As a result, its Electronic Credit Ledger had ceased to be functional. The re-credit of ₹1.10 crore therefore did not offer the petitioner a meaningful avenue for utilisation of the amount.
The Division Bench considered whether the GST authorities were legally prohibited from making a cash payment of the amount that had earlier been directed to be re-credited as ITC.
The Court categorically observed that there was no prohibition under the Act against making payment in cash of ₹1,10,72,753, which had previously been directed to be re-credited to the Electronic Credit Ledger.
The Court’s approach was particularly influenced by the fact that the assessee’s business had ceased to exist. Since the Electronic Credit Ledger was no longer functional, retaining the refund in the form of ITC would effectively deprive the petitioner of the practical benefit of the refund.
Taking into account the circumstances of the case, the High Court directed the concerned authorities to refund ₹1,10,72,753 to the petitioner in cash, along with applicable interest, if any, in accordance with law.
The department was directed to complete the refund within eight weeks from the date of the Court’s order.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
