Facts of the Case: The petitioner filed a writ petition seeking refund of the statutory pre-deposit made under Section 107 of the CGST/JGST Act, 2017 for maintaining an appeal. The appeal was allowed in favour of the assessee, but the refund application filed on the GST portal was rejected through an automated order dated 07.06.2024, citing limitation under Section 54 of the Act.

The petitioner challenged the rejection, contending that the pre-deposit is not in the nature of tax but a statutory deposit refundable as a matter of right once the appeal is decided in favour of the assessee. The petitioner also sought quashing of deficiency memos in Form GST RFD-03 and argued that withholding of the amount violates Article 265 of the Constitution.

The State relied on the time limitation prescribed under Section 54 for claiming refunds and resisted the claim.

Issue: Whether the limitation prescribed under Section 54 of the CGST/JGST Act, 2017 applies to the refund of statutory pre-deposit made for maintaining an appeal under Section 107, and whether the State is justified in withholding such amount.

Held that: The High Court allowed the writ petition and passed the following findings and directions.

• The Court reiterated that the pre-deposit under Section 107(6) of the CGST/JGST Act is a statutory requirement to maintain an appeal and does not partake the character of “tax”.
• Once the appeal is decided in favour of the assessee, the amount has to be refunded as a matter of right. Retention of such amount would be without authority of law and contrary to Article 265 of the Constitution.
• Section 54 deals with refund of taxes and other amounts paid as duty. A pre-deposit, by its nature, is not a tax liability but a security or condition for appeal. Hence, its refund cannot be governed by the procedural limitation of Section 54. The rejection of refund on the ground of limitation under Section 54 was held unsustainable.
• Reliance placed upon M/s. BLA Infrastructure Pvt. Ltd. v. State of Jharkhand, wherein a Division Bench had categorically held that the refund of pre-deposit is automatic and not subject to limitation.
• The deficiency memos issued in Form GST RFD-03 were also quashed as they were consequential to the erroneous application of Section 54 limitation and had no legal basis.
• The respondents were directed to process and release the refund of the pre-deposit within four weeks from receipt of the order. In case of failure, the amount would carry interest at 6% per annum, payable from the date it became due till the date of actual payment, as per the principle laid down in Sandvik Asia Ltd. v. CIT and followed in GST context by several High Courts.
• Since the pre-deposit is not collected as tax and cannot be passed on to any other person, the doctrine of unjust enrichment does not apply. Hence, refund is unconditional.

Case Name: M/s. GTL Infrastructure Limited Versus The State of Jharkhand, Commissioner, State Goods & Services Tax, Jharkhand, Additional Commissioner (Admin), State Goods & Services Tax, Jharkhand, State Tax Officer, Ranchi dated 20.08.2025

To read the complete judgment 2025 Taxo.online 2018