Facts of the Case:

In this case, the petitioner M/s. Rashmi Agency, challenged the order passed by the Deputy Commissioner , refusing to consider its refund application filed under Section 54 of the CGST/OGST Act. During a search conducted by the DGGI under Section 67 against Hotel Rashmi Plaza, an amount of ₹33,00,000 was recovered from the petitioner and deposited through Form GST DRC-03 under protest. Subsequently, it was discovered that the amount had been mistakenly deposited under the GSTIN of Rashmi Agency instead of the GSTIN of Hotel Rashmi Plaza, which was the entity under investigation. The petitioner’s earlier refund claim had been rejected by the proper officer but was allowed in appeal by the Additional Commissioner (Appeals), who held that the recovery during investigation was contrary to CBIC Instruction No. 01/2022-23 and settled judicial principles governing voluntary tax payments during investigation. 

Pursuant to the appellate order, the petitioner filed a fresh refund application. However, the Deputy Commissioner refused to consider the application on the ground that the appellate order had not attained finality as the State still had six months under Section 112(3) of the CGST Act to file an appeal before the GST Appellate Tribunal. Aggrieved by this refusal, the petitioner approached the High Court contending that the Deputy Commissioner lacked jurisdiction to withhold the refund in the absence of any pending appeal or proceedings and had acted contrary to the binding appellate order.

Issue:

Whether the proper officer can refuse to consider or withhold a refund arising from a favourable appellate order merely because the statutory period available to the Department for filing an appeal before the GST Appellate Tribunal has not expired, even though no appeal or other proceedings were pending on the date of refusal, and whether such action can be justified under Section 54(11) of the CGST Act.

Held That:

The Court observed that Section 54(11) empowers the Commissioner to withhold refund only when the order giving rise to the refund is already the subject matter of an appeal or other pending proceedings, coupled with a reasoned opinion that release of the refund would adversely affect revenue on account of fraud or malfeasance. Mere availability of time for the Department to file an appeal or a contemplated future appeal does not satisfy the statutory preconditions for invoking Section 54(11).

The Court further held that the Deputy Commissioner had no authority to sit in appeal over or disregard the binding appellate order merely because the limitation period for departmental appeal had not expired. The statutory scheme under Rule 92(2) of the GST Rules requires a reasoned order in Form GST RFD-07 recording satisfaction of the jurisdictional conditions before refund can be withheld, which was absent in the present case.

The Court also emphasized that subordinate authorities are bound to implement appellate orders unless they are stayed or reversed by a competent forum and cannot deny consequential relief based on speculative future litigation. Since no appeal had been filed before the GST Appellate Tribunal on the date the refund application was rejected, the Deputy Commissioner lacked jurisdiction to invoke Section 54(11).

Consequently, the impugned order dated 02.05.2026 was set aside, and the matter was remanded to the Deputy Commissioner for fresh consideration of the refund application within two weeks after granting an opportunity of hearing and keeping in view the appellate order, the petitioner’s reply, and CBIC Instruction No. 01/2022-23. The High Court held that the impugned order refusing to consider the refund application was legally unsustainable and without jurisdiction.

Case name: M/s. Rashmi Agency Versus Deputy Commissioner CT & GST Circle, Cuttack-I City and others. dated 25.06.2026

To read the complete judgement 2026 Taxo.online 1783