Refund Procedure must follow statutory refund mechanism; credit to Consumer Welfare Fund required when tax incidence was passed on.

Section 54 requires that, once a refund is allowed, the amount be credited to the Consumer Welfare Fund under Section 57; limited exceptions permit direct payment to applicants only where the applicant has not passed on the tax, which is not the case here. The High Court's improvised procedure-accepting an undertaking to create a designated account and seek tariff adjustments to indirectly benefit consumers-is not authorised by Section 54 or its Rules and departs from the statutory refund mechanism. Consequent effect: the High Court's dispensation is unsustainable and the refundable amount must be credited to the Consumer Welfare Fund.

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Issues: Whether the High Court was justified in directing a refund procedure, not contemplated by Section 54 of the Central Goods and Services Tax Act, 2017, whereby the taxable person would deposit the refundable amount in a designated account and seek to pass the benefit to consumers through tariff adjustments instead of crediting the refundable amount to the Consumer Welfare Fund under Section 57.

Analysis: Section 54(5) of the Central Goods and Services Tax Act, 2017 contemplates that on satisfaction that a refund is allowable the officer shall make an order and the amount so determined is to be credited to the Consumer Welfare Fund referred to in Section 57. Section 54(8) provides limited exceptions permitting payment of refundable amounts to applicants; Section 54(8)(e) permits payment to the applicant only where the applicant has not passed on the incidence of the tax to any other person. In the present matter it is admitted that the respondent had passed on the incidence of the tax to consumers, hence the statutory exception in Section 54(8)(e) is inapplicable. The procedure fashioned by the High Court - acceptance of an undertaking to create a designated bank account and to seek tariff adjustments before the electricity regulator so as to indirectly recompense consumers - is not provided for under Section 54 or the Rules framed thereunder and constitutes a departure from the statutory refund mechanism which requires credit to the Consumer Welfare Fund unless a statutory exception applies.

Conclusion: The High Court's procedure for disbursal of the refund is not sustainable in law; the refundable amount is to be credited to the Consumer Welfare Fund under Section 57 of the Central Goods and Services Tax Act, 2017 and the appeal is allowed.

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