The Delhi High Court has clarified the correct legal interpretation of Section 54(11) of the Central Goods and Services Tax (CGST) Act, 2017. The Court held that the refund of GST cannot be held back solely based on the Commissioner's opinion. The Revenue department must satisfy two conditions before withholding any refund granted to an assessee.
According to the law, Section 54(11) requires the following twin conditions to be fulfilled:
- There must be a pending proceeding—either an appeal or any other process under the CGST Act—against the order granting the refund.
- The Commissioner must also form an opinion that granting the refund at this stage is likely to adversely affect the revenue.
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“In the opinion of this Court, the Department's opinion under Section 54(11) cannot be relied upon on a standalone basis,” observed the Division Bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta.
The Court was hearing a petition filed by a wholesale trader, who challenged the withholding of his refund despite a favorable order by the Appellate Authority.
Background of the Case
The Petitioner had initially filed for a refund which was rejected by the Revenue Department. However, the Appellate Authority, after reviewing the case, found the claim genuine and compliant with the necessary conditions under Section 16(2) of the CGST Act. The authority thus directed that the refund should be allowed.
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Despite this, the refund was not processed, as the Department decided to file a review of the Appellate Authority’s decision. Additionally, the Commissioner formed an opinion under Section 54(11), stating that granting the refund would be contrary to the interest of revenue.
However, as pointed out by the Petitioner, no actual review order had been passed and no appeal had been filed. The Petitioner argued that since the Appellate Authority’s order stood unchallenged, it remained valid and enforceable. Therefore, invoking Section 54(11) was not justified.
On the other hand, the Revenue argued that while they intend to file an appeal, the same has not been done due to the absence of an operational Appellate Tribunal at the moment.
“In the absence of an appeal or any other proceeding pending, challenging the order of the Appellate Authority, the opinion under Section 54(11) cannot result in holding back the refund,” stated the High Court.
The Court concluded that since the refund was granted by the Appellate Authority and no review or appeal is pending, the Department’s action to withhold the refund was unlawful.
As a result, the Court directed the Revenue to process the refund along with applicable interest as per Section 56 of the CGST Act, within two months.
“The Department cannot hold back the refund when the Appellate Authority’s order is standing and unchallenged,” said the Delhi High Court.
Appearance: Mr. Sidhant Sarwal, Adv for Petitioner; Mr. Gibran Naushad, Sr. Standing Counsel with Mr. Harsh Singhal & Mr. Suraj Shekhar Singh, Advs for Respondent
Case title: Shalender Kumar v. Commissioner Delhi West Cgst Commissionerate & Ors
Case no.: W.P.(C) 3824/2025
