Facts of the case:

In this case, despite the appellate order, the refund was not released by the department to the petitioner. As the department failed to release the refund, the petitioner again approached the High Court. The department sought to justify withholding of refund by relying upon Section 54(11) of the CGST Act, contending that the Commissioner had taken a decision to file an appeal against the appellate order. Rejecting this contention, the High Court, by order held that mere intention or decision to file an appeal does not permit withholding of refund under Section 54(11), unless the refund order is actually the subject matter of pending appeal proceedings. The Court accordingly directed release of refund along with statutory interest.

During pendency of the writ petition, the High Court directed the department to deposit the refund amount with the Registrar General of the Court instead of releasing the same to the petitioner.

Thereafter, the petitioner initiated the present proceedings alleging wilful disobedience and non-compliance of the High Court’s earlier directions for refund release. The Court noted that though the department had been relegated to pursue statutory appeal before the Tribunal, no interim order had been obtained restraining release of refund. Since the refund amount already stood deposited before the Court pursuant to earlier directions, the Court ordered release of the amount to the petitioner after expiry of three weeks, subject to orders that may ultimately be passed by the Tribunal in departmental appeal proceedings.

Issue:

Whether refund sanctioned pursuant to an appellate order can be withheld merely because the department intends to challenge the order or has decided to file an appeal, in absence of any stay or interim protection granted by a higher forum under Section 54(11) of the CGST Act.

Held that:

The Delhi High Court held that refund cannot be withheld merely on the basis of a departmental decision or intention to file an appeal against the appellate order granting refund. Section 54(11) of the CGST Act applies only where the refund order is actually the subject matter of pending appeal or further proceedings and where the competent authority forms an opinion that grant of refund may adversely affect revenue interests due to fraud or malfeasance. Mere contemplation or filing decision does not automatically place the appellate order in abeyance.

The Court reiterated that unless a competent appellate forum grants stay against operation of the refund order, the department remains bound to comply with the appellate authority’s directions. Reliance was placed on the earlier decision in Alex Tour & Travel (P) Ltd. vs. Commissioner (CGST), wherein it was held that revenue authorities cannot ignore appellate orders simply because they propose to challenge them.

The Court further observed that after disposal of the departmental writ petition, the department had merely been relegated to pursue statutory appellate remedy before the GST Tribunal, and admittedly no interim order restraining release of refund had been obtained from the Tribunal. Therefore, the amount deposited before the Court pursuant to earlier interim directions was directed to be released to the petitioner, though subject to the outcome of further appellate proceedings.

Case Name: Truth Fashion Versus S.K Singh Special Commissioner & Anr. dated 04.05.2026