2026-VIL-642-ORI
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SGST High Court Cases

GST - Power to Withhold Refund under Section 54(11) of the CGST Act, 2017 – Refund claim of amount recovered during DGGI search operation – Appellate Authority allowed refund by holding that the collection was made during the course of inspection in contravention of CBIC Instruction No.01/2022-23 - Rejection of refund application on the ground that the appellate order had not attained finality as the State could file appeal before the Appellate Tribunal and therefore, consideration of refund application at that stage would be premature and may adversely affect the interest of revenue - Whether the Deputy Commissioner can refuse to consider a refund application by invoking the power under Section 54(11) of the CGST Act to withhold refund on the ground that an appeal by the State to the Appellate Tribunal is contemplated but not yet filed – HELD - The power to withhold refund under Section 54(11) of the CGST Act is strictly circumscribed and can be exercised only when an order giving rise to refund is the subject-matter of an appeal or further proceeding that is already pending, and the Commissioner has formed an opinion that grant of such refund is likely to adversely affect the revenue on account of malfeasance or fraud committed. The statute mandates recording of reasons for withholding refund in Form GST RFD-07 in consonance with Rule 92(2) of the CGST Rules - Mere quoting of Section 54(11) without establishing the existence of pending proceedings does not empower the authority to withhold refund. A contemplated or prospective action by the State to file an appeal cannot be the basis for refusing to consider a refund application that has flowed from an appellate order. The authority must respect the appellate order till it is reversed, varied or modified by a competent authority or Court. Prior to filing of appeal before the Appellate Tribunal, the authority does not have the jurisdiction to assume power to withhold refund - In the instant case, the Dy. Commissioner lacked jurisdiction to invoke Section 54(11). The reason assigned in the impugned order that consideration of refund application is premature before lapse of six months period is not a valid ground under the statute and constitutes arbitrary and irrational exercise of power – The impugned order is set aside and the matter is remitted to the Dy Commissioner for fresh consideration of the refund application – The writ petition is allowed
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