Withheld GST refund must be released to taxpayer despite department's intent to appeal and non-functioning appellate tribunal

HC directed that the withheld GST refund be released to the petitioner, finding the matter covered by earlier HC authority that refunds payable with interest should not be retained merely because the Department intends to appeal and the GST Appellate Tribunal is not functioning. The Court held it would be adverse to the Department's interest to keep refunds pending since any successful appeal would still bind the petitioner. Matter listed for further hearing on 19 August 2025.

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Petition challenges impugned order dated 25 February 2025 under Section 54(11) of the Central Goods and Services Tax Act, 2017, which withheld a refund previously granted by the Appellate Authority (order dated 19 December 2023) on the ground that the GST Appellate Tribunal is not functioning and the Department intends to challenge the Appellate Authority's order. Court issued notice and directed the State Standing Counsel to accept notice and take instructions. Court held the matter is fully covered by the decision in W.P.(C) 3824/2025 (Shalender Kumar v. Commissioner), expressly stating: "14. In the opinion of this Court the Department's opinion under 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. [...] 16. It is, however, made clear that if in law the Department can still challenge the said Appellate Authority's order, the processing of refund in terms of the today's order of this Court shall be subject to the decision in any appeal. The refund shall be processed along with interest in terms of Section 56 of the CGST Act, 2017, within a period of two months. 17. In the opinion of this Court, considering the fact 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." Matter listed for further hearing on 19 August 2025.

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