Tax authorities cannot withhold refund merely because appeal is contemplated when appellate refund order remains operative and unchallenged

HC held that tax authorities cannot withhold refund solely on the ground that an appeal is contemplated against an appellate order. Relying on the principle that executive authorities are bound by appellate decisions unless stayed or set aside, the HC ruled that non-implementation would undermine the rule of law. Since the appellate order dated 21 August 2025 granting refund remained operative and was neither stayed nor reversed, the respondent's refusal to comply was illegal. HC directed refund of Rs. 7,27,83,010/- to the petitioner within ten days and allowed the petition.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the refund directed by the Appellate Authority under the Central Goods and Services Tax Act, 2017 can be withheld on the ground that an appeal against such order is contemplated.

1.2 Consequences, including liability for additional interest and recovery from responsible officers, for non-compliance with an appellate refund order not stayed or set aside.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Withholding of refund on the ground of a contemplated appeal

Interpretation and reasoning

2.1.1 The Court noted that the Appellate Authority, by order dated 21 August 2025, had directed refund of Rs. 7,27,83,010/- to the petitioner along with applicable interest under Section 56 of the Central Goods and Services Tax Act, 2017.

2.1.2 The Court recorded the petitioner's plea that the first respondent declined to grant the refund on the ground that an appeal against the said appellate order was contemplated.

2.1.3 The Court relied upon the judgment of the Delhi High Court in "Mr. Brij Mohan Mangla vs. Union of India & Ors." which held that authorities cannot ignore or withhold implementation of orders passed by the Appellate Authority merely because they have decided, or are contemplating, to file an appeal; such a practice would be debilitating to the rule of law.

2.1.4 The Court held that so long as the Appellate Authority's order dated 21 August 2025 is neither set aside nor stayed, the first respondent is bound to comply with it and cannot refuse refund on the basis of a proposed appeal.

Conclusions

2.1.5 The Court concluded that the withholding of the refund solely on the ground that an appeal is contemplated is impermissible, and the first respondent is obliged to implement the appellate refund order in the absence of any stay or setting aside of that order.

2.2 Directions on refund, additional interest, and recovery from responsible officers

Interpretation and reasoning

2.2.1 Having held that the respondents are bound by the appellate order, the Court directed the first respondent to refund the amount of Rs. 7,27,83,010/- to the petitioner within 10 days from the date of uploading of the Court's order, along with the statutorily applicable interest under Section 56 of the Central Goods and Services Tax Act, 2017.

2.2.2 The Court further directed that, if the refund is not made within the stipulated period, the first respondent shall, over and above any statutorily payable interest, pay additional interest at 6% per annum to the petitioner.

2.2.3 The Court mandated that such additional interest shall first be paid to the petitioner by the respondents, and thereafter the respondents shall conduct an inquiry, determine liability, and recover the additional amount from the officer or officers responsible for the delay in implementing the appellate order.

2.2.4 The Court emphasized that under no circumstances should the State or Central Exchequer be made accountable for payment of such additional amounts from taxpayers' funds.

Conclusions

2.2.5 The Court allowed the petition, made the Rule absolute, and imposed a time-bound direction for refund, with a clear regime of additional interest and personal liability of erring officers to ensure compliance with appellate refund orders and to protect public revenue from bearing the burden of delays caused by officials.

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