Facts of the Case:

In this case, the respondent Torrent Power Ltd. is engaged in generation and distribution of electricity in Gujarat, supplying power to consumers in Ahmedabad and Surat. Pursuant to Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017, the respondent-company collected Integrated GST (IGST) from its consumers on certain transactions. Subsequently, the constitutional validity of the said notification was challenged before the Gujarat High Court in Mohit Minerals Pvt. Ltd. v. Union of India, wherein the notification was declared unconstitutional. As a result, the tax collected under the invalidated notification became refundable.

However, it was an admitted position that the respondent-company had passed on the incidence of the tax to its consumers while raising electricity bills during the period from June 2017 to January 2020. Under Section 54(5) of the CGST Act, refund amounts are ordinarily credited to the Consumer Welfare Fund. Section 54(8)(e) provides an exception whereby refund may be paid to the applicant only if the applicant had not passed on the incidence of tax to any other person.

Despite this statutory scheme, the Gujarat High Court accepted an affidavit filed by the respondent-company proposing an alternative mechanism. The High Court permitted the respondent-company to open a designated bank account, deposit the refund amount, 

Issue:

Whether refund of tax collected under an invalidated notification, where the incidence of tax was admittedly passed on to consumers, could be paid to the company instead of being credited to the Consumer Welfare Fund. Whether the High Court was justified in devising a refund mechanism not contemplated under Section 54 of the CGST Act. 

Held that:

The Court held that Section 54 of the CGST Act constitutes a complete statutory code governing refund. As per Section 54(5), any refundable amount shall be credited to the Consumer Welfare Fund unless it falls within the exceptions enumerated in Section 54(8). Section 54(8)(e) specifically provides that refund may be paid to the applicant only if the applicant has not passed on the incidence of tax and interest to any other person.

In the present case, it was an admitted fact that the respondent-company had passed on the tax burden to its consumers. Therefore, the statutory exception under Section 54(8)(e) was not attracted. Consequently, the refundable amount necessarily had to be credited to the Consumer Welfare Fund. The Court further held that the High Court’s acceptance of the respondent-company’s proposal introduced an entirely new and alien modality for refund, which is not contemplated under the CGST Act or the Rules framed thereunder. Courts cannot create procedures contrary to express statutory provisions.

Additionally, the proposed mechanism was found to be impractical and unworkable, as it involved identification and recompense of over one crore consumers spread across two cities, with no reliable method to ensure that the actual burden-bearers would receive the benefit. Additionally, the proposed mechanism was found to be impractical and unworkable, as it involved identification and recompense of over one crore consumers spread across two cities, with no reliable method to ensure that the actual burden-bearers would receive the benefit.

Accordingly, the respondent-company was directed to transfer ₹19,28,86,868/- to the authorities for credit to the Consumer Welfare Fund within three months.

The Supreme Court allowed the appeal and set aside the High Court’s judgment. 

Case Name: Union of India & Anr. Versus Torrent Power Ltd. dated 10.02.2026