Facts of the case:

In this case, the petitioner had filed a refund application under Section 54(3) of the CGST Act, 2017 seeking refund for the period April 2020 to March 2022. Since the refund application remained undecided for a prolonged period, the petitioner approached the Delhi High Court. By order dated 28.03.2025, the Court allowed the writ petition and specifically directed the GST authorities to grant the refund along with statutory interest within four weeks.

As the refund was not released despite the judicial mandate, the petitioner filed an application under Section 151 of the Code of Civil Procedure seeking compliance of the Court’s order. During those proceedings, the Department contended that the refund application had inadvertently been forwarded to the wrong ward officer, resulting in delay. The Court permitted the petitioner to file a fresh refund application and directed the authorities to process it expeditiously.

Subsequently, the Department raised objections regarding alleged discrepancies in the petitioner’s GST returns. The matter was referred back to the Bench that had originally passed the refund order. On 13.02.2026, the Court clarified that its earlier order dated 28.03.2025 required no further clarification and that the petitioner could take appropriate legal steps for enforcement of the order. Thereafter, the petitioner initiated contempt proceedings. During the contempt proceedings, the Department assured the Court that necessary steps would be taken to grant the refund in accordance with the earlier directions.

However, instead of sanctioning the refund, the Department passed an order dated 24.03.2026 rejecting the refund claim. Aggrieved by the rejection order, the petitioner again approached the High Court contending that the authorities had acted in direct violation of the binding judicial directions.

Issue:

Whether the GST authorities could reject the refund claim after the High Court had already issued a categorical direction to sanction the refund within a specified time. Also, whether the subsequent rejection order amounted to non-compliance or contempt of the earlier judicial orders and whether the Department could reopen issues relating to discrepancies or shortfalls that had already been considered while granting relief in the writ proceedings.

Held that:

The Delhi High Court expressed serious concern regarding the conduct of the GST authorities. The Court noted that the refund claim had already been adjudicated by the Division Bench through its order dated 28.03.2025, wherein a positive direction was issued to sanction the refund together with statutory interest. Subsequently, when questions were raised regarding alleged deficiencies in the refund application, the same Bench had clarified on 13.02.2026 that no further clarification of the original order was required and that the directions contained therein were sufficiently clear.

The Court observed that despite these unequivocal directions, the authorities proceeded to reject the refund claim through the impugned order dated 24.03.2026. Prima facie, such action appeared inconsistent with and contrary to the earlier orders of the High Court. The Court accepted the petitioner’s contention that once the refund had been directed to be granted by judicial order, the authorities were expected to implement the order rather than revisit the merits of the refund claim by raising fresh objections.

The Court further observed that the issue of deficiencies and shortfalls had already been considered during the earlier proceedings. Therefore, the subsequent rejection of the refund application, despite repeated judicial directions and assurances given before the Court, prima facie indicated non-compliance with the order dated 28.03.2025. The Bench specifically recorded its prima facie view that the respondents appeared to be in contempt of the Court’s earlier directions.

Nevertheless, since the Department sought time to place its response on record, the Court granted four weeks for filing a reply and listed the matter for further consideration, while keeping open the issue of contempt and compliance with its earlier orders.

Case Name: M/s. Mahesh Value Products Pvt. Ltd. Versus Chief Commissioner of CT & GST and others. dated 05.06.2026