💡 GST Refund Denial: Delhi HC Lays Down Strict Rules
In a landmark interpretation of Section 54(11) of the CGST Act, 2017, the Delhi High Court has firmly clarified that a mere opinion from the GST Commissioner isn’t enough to deny a taxpayer their refund. The ruling establishes that twin conditions must be satisfied before holding back a GST refund, reinforcing procedural integrity in refund processing.
📌 What Triggered the Ruling?
The case involved Shalender Kumar, a wholesale trader whose refund claim, although upheld by the Appellate Authority, was not processed by the Department. The Department contended it intended to file a review and simultaneously issued an opinion under Section 54(11) claiming refund issuance could harm revenue interests.
However, the Court noted that the Appellate Authority’s order had neither been stayed nor challenged through a pending proceeding.
⚖️ What Section 54(11) of CGST Act Really Says
As per Section 54(11):
Refunds may be withheld if:
- The refund order is under challenge or subject to pending legal proceedings (appeal, review, etc.); and
- The Commissioner opines that releasing the refund may adversely affect the revenue.
✅ Both conditions are mandatory. One without the other is not sufficient.
🧾 Key Highlights from Delhi High Court Ruling
| Observation | Implication |
|---|---|
| Mere opinion under 54(11) is insufficient | Refund cannot be held unless appeal/review is pending |
| Appellate Authority’s order stands valid | Refund must be honored if unchallenged |
| No Appellate Tribunal currently available | Not a valid reason to deny refund |
| Refund to be issued with interest | Under Section 56, interest is mandatory for delay |
⚖️ Case Summary: Shalender Kumar v. Commissioner, Delhi West CGST
- W.P.(C) 3824/2025
- Refund claim upheld by Appellate Authority
- No formal review or appeal was pending
- Department relied solely on internal opinion under S.54(11)
- Court held the refund must be processed with interest
🧠 Why This Matters for Businesses?
This ruling ensures that GST refund denial must follow due process. Departments cannot:
- Rely on subjective opinions alone
- Delay refunds citing intent to appeal
- Sidestep Appellate Authority’s unchallenged orders
It sets a strong precedent ensuring that businesses are not penalized due to administrative inaction.
📌 Practical Takeaways for Taxpayers
| ✅ Do This | ❌ Avoid This |
|---|---|
| Insist on refund if appellate order is in your favor and unchallenged | Accept refund denial without verifying if an appeal is actually filed |
| Ask for interest on delayed refunds under Section 56 | Rely solely on oral communication from Department |
| Keep track of timelines post appellate decisions | Wait indefinitely for the Department’s next move |