Delhi HC Orders GST Refund Release; Department Cannot Withhold on “Opinion” Alone

The Delhi High Court has recently given relief to a petitioner whose refund was withheld by the GST department.

The petitioner, Omega QMS, provides technical consultancy services in Management Systems, Quality Assurance and Product Certification in India and some foreign countries. The petitioner’s refund application for FY 2019-20 was rejected by the GST department in the order-in-original dated 24.08.2021. Therefore, the petitioner challenged the order before the Appellate Authority, which set aside the order.

However, instead of giving the refund, the GST Department filed a review against the Appellate Authority’s order, saying that the processing of the refund would affect the revenue. Due to this, it issued an order dated 04.03.2025, rejecting the petitioner’s refund, which was earlier allowed by the appellate authority. Therefore, the petitioner approached the Delhi High Court.

The petitioner argued that since the order of the Appellate Authority is not challenged or quashed, it is still in effect. The Bench, Comprising Justice Prathiba M. Singh and Justice Shail Jain, observed that Section 54(11) allows withholding of refund only if:

• There is an appeal or pending legal proceeding under the Act.
• The commissioner gives the opinion that giving a refund would cause a loss to the revenue.

The court held that the opinion under Section 54(11) cannot be the only reason to hold the refund. The refund was already allowed by the Appellate Authority, and no order has been passed against the review filed by the GST department. In this case, no actual appeal or legal proceeding is pending. The court also cited the case of G.S. Industries v. Commissioner Central Goods and Services Tax, Delhi West & Ors, where the same issue was covered.

Therefore, the court ruled in favour of the petitioner and allowed for the refund. The court directed the GST Department to process the refund along with interest under Section 56 of the CGST Act. The amount must be credited to Omega QMS by September 30, 2025. The court also clarified that if the Department later files an appeal, the refund will be subject to the decision of that case.