Facts of the Case:

In this case, the petition was filed to challenge the order dated 06.05.2026 in relation to the petitioner’s GST refund claim. The petitioner had originally filed its refund application on 25.07.2025. Upon consideration of the claim, the authorities sanctioned a total refund of ₹1,38,91,287. However, instead of paying the entire sanctioned amount in cash, the impugned order directed that ₹1,10,72,753 be re-credited to the petitioner’s Electronic Credit Ledger as Input Tax Credit (ITC), while the remaining portion of the refund was paid to the petitioner in cash.

The petitioner challenged the aforesaid treatment on the ground that it had permanently discontinued its business operations and surrendered its GST registration. Consequently, the Electronic Credit Ledger was no longer functional. In such circumstances, according to the petitioner, re-crediting ₹1,10,72,753 as ITC was of no practical or substantive benefit because there was no continuing business activity against which such credit could be utilised. The petitioner therefore contended that the refund, having already been sanctioned, ought to have been actually disbursed in cash rather than being confined to a credit in an electronic ledger which could no longer be utilised.

Further, the petitioner challenged the denial of statutory interest on the refund amount. It was contended that the original refund application had been filed on 25.07.2025 and that Section 56 of the UPGST Act, 2017 contemplated payment of interest where the refund was not granted within the prescribed period of sixty days. The petitioner accordingly sought interest on the entire refund amount of ₹1,38,91,287, calculated from the expiry of sixty days from the date of the original refund application until the date of actual refund/payment.

On this basis, the petitioner sought, inter alia, quashing of the order dated 06.05.2026 to the extent that it directed re-credit of ₹1,10,72,753 as ITC, a direction for payment of the said amount in cash to the petitioner’s bank account, and payment of applicable statutory interest on the delayed refund.

Issue:

Whether re-credit of sanctioned refund as ITC was valid when the taxpayer had discontinued business? Whether the amount could be refunded in cash? Whether the petitioner was entitled to interest on the delayed refund?

Held That:

The Court first recorded that there was no dispute regarding the factual position that the impugned order dated 06.05.2026 had directed ₹1,10,72,753 to be re-credited to the petitioner’s Electronic Credit Ledger as ITC. The Court further noted that out of the total refund amount of ₹1,38,91,287, the amount of ₹1,10,72,753 had already been dealt with by way of re-credit as ITC, whereas the remaining balance had been paid to the petitioner in cash.

A significant factor considered by the Court was that the petitioner was no longer carrying on business. Since the petitioner had discontinued its business operations and surrendered its GST registration, the Electronic Credit Ledger had ceased to be functional. Thus, although the amount of ₹1,10,72,753 stood credited as ITC, the petitioner had no continuing business activity through which the credit could ordinarily be utilised. The Court therefore considered the practical consequence of the mode in which the refund had been granted rather than treating the re-credit as sufficient merely because the amount had technically been entered in the electronic ledger.

The Court expressly held that there was no prohibition under the provisions of the Act against making payment in cash of ₹1,10,72,753, notwithstanding the fact that the amount had earlier been directed to be re-credited as ITC in the Electronic Credit Ledger. This finding enabled the Court to grant effective relief to the petitioner instead of leaving the sanctioned refund in an unusable form.

Having regard to the peculiar facts, particularly the fact that the petitioner’s business was no longer in existence, the Court directed the concerned authorities to refund ₹1,10,72,753 to the petitioner in cash. The Court further directed that the cash refund should be accompanied by applicable interest, if any, in accordance with the provisions of the Act. The authorities were directed to complete the refund exercise within eight weeks from the date of the Court’s order.

The Court consequently ensured that the refund sanctioned in favour of the petitioner resulted in an actual monetary benefit rather than merely an electronic credit which, in the circumstances of the case, had become incapable of meaningful utilisation.

Case name: M/s Vossloh Cogifer Turnouts India Pvt. Ltd. Thru. Authorised Signatory Pulipati Yadagiri Versus State Of U.P. Thru. Prin. Secy. Institutional Finance Lko. And Another dated 10.08.2026

Citation No. 2026 Taxo.online 2419