Mihika Pharmaceuticals Vs. State of Maharashtra (Bombay High Court)
Summary : The Bombay High Court, in Mihika Pharmaceuticals Vs. State of Maharashtra, held that an excess pre-deposit made for pursuing a GST appeal could not be retained by the tax authorities after the appellate and rectification proceedings had attained finality. The petitioner challenged the refund rejection order dated 14 July 2026, whereby its claim for ₹19,61,750 arising from an excess appeal pre-deposit was rejected. The dispute originated from an adjudication order dated 31 December 2024 for FY 2020-21, raising a demand of ₹3,66,03,378. The petitioner preferred an appeal under Section 107 of the Maharashtra Goods and Services Tax Act, 2017, and deposited ₹19,64,722. The First Appellate Authority, by its order dated 10 March 2026, reduced the demand to ₹3,81,771. Subsequently, a rectification order dated 16 April 2026 under Section 161 further reduced the confirmed demand to ₹5,648, which the petitioner had already paid.
The petitioner applied for a refund of ₹19,61,750 through Form GST RFD-01 on 4 May 2026. However, the department maintained that the appellate and rectification orders did not expressly direct sanction of the refund and that the petitioner was required to independently establish its entitlement through documentary evidence. Despite the petitioner’s reply, the refund application was rejected through Form GST RFD-06 dated 14 July 2026. The petitioner also alleged that the rejection was made without granting a personal hearing as required under Rule 92(3) of the CGST/MGST Rules, 2017. Relying on IBM India Pvt. Ltd. Vs. Union of India and Ors., the petitioner submitted that an amount deposited as a statutory condition for hearing an appeal possesses the character of a security deposit rather than duty and must be returned when the appeal succeeds wholly or partly.
The High Court observed that the rectification proceedings had concluded on 16 April 2026, reducing the demand to ₹5,648, and that no party had challenged the resulting order. Accordingly, the proceedings had attained finality. Referring to its earlier decision in IBM India Pvt. Ltd., which discussed the principle recognised in Nelco Limited Vs. Union of India, the Court accepted that the statutory appeal pre-deposit could not continue to be retained in the circumstances of the case. The Court allowed the writ petition, quashed the refund rejection order dated 14 July 2026 and directed the respondents to sanction and disburse ₹19,61,750 within six weeks from communication of the judgment. The ruling reinforces the taxpayer’s entitlement to recover excess GST appeal deposits once the underlying demand has been finally determined. The Court did not separately adjudicate the alleged denial of personal hearing or award interest on the refund.
Cases Discussed
1. IBM India Pvt. Ltd. Vs. Union of India and Ors. — Bombay High Court; Writ Petition (L) No. 38052 of 2025; decided on 28 August 2026.
2. Nelco Limited Vs. Union of India — 2002 (144) E.L.T. 56 (Bom.); maintained in 2002 (144) E.L.T. A104 (S.C.).
Five SEO Titles (5ST)
GST Appeal Pre-Deposit Is Security Deposit: Bombay HC Orders Refund
Bombay HC Orders ₹19.61 Lakh GST Pre-Deposit Refund After Appeal
GST Refund Cannot Be Denied After Appellate Order Attains Finality: HC
Bombay HC Quashes Rejection of Excess GST Appeal Pre-Deposit Refund
GST Pre-Deposit Refund: Bombay HC Rules in Favour of Taxpayer
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. By the present Writ Petition, the Petitioner is challenging the Refund Rejection Order dated 14th July, 2026 in Form GST RFD-06 passed by the Respondent No.3 which is at Exhibit-G to this Petition, whereby the Petitioner’s legitimate claim of Rs.19,61,750/- arising from excess pre-deposit paid during the Appeal proceedings, is rejected.
2. The learned Counsel for the Petitioner submitted that the the Respondent No.3 on 31st December, 2024 passed an Adjudication Order in Form GST DRC-07 for FY 2020-21 raising a demand of Rs.3,66,03,378/-. Being aggrieved with the same, the Petitioner preferred Appeal under Section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST) and deposited Rs.19,64,722/- as pre-deposit. Thereafter, the First Appellate Authority-Respondent No.2 passed the Order-in-Appeal on 10th March, 2026 in Form GST APL-04, reducing the total demand to Rs.3,81,771/- and directing the Proper Officer to consider the pre-deposit and recover/ refund the final amounts accordingly. Learned Counsel for the Petitioner further submits that on 16th April, 2026, the First Appellate Authority accepted the Petitioner’s rectification application under Section 161 of MGST Act reducing the confirmed demand further to Rs.5,648/-. Thereafter, the Petitioner on 4th May, 2026 filed a Refund Application in Form GST RFD-01 (ARN AA270426173795P) claiming refund of Rs.19,61,750/- being the excess pre-deposit over the finally confirmed demand of Rs.5,648/-. Learned Counsel for the Petitioner pointed out that the demand of Rs.5,648/- was paid by the Petitioner and compliance was also submitted to the Respondent No.3. The Respondent No.3 however, did not sanction refund and that the Respondent No.3 instead issued second Show Cause Notice in Form GST RFD-08 raising a new ground, that the appellate/ rectification order did not itself direct sanction of refund and that the Petitioner was required to independently establish through documentary evidence that the amount had become refundable. The Petitioner filed its reply in Form GST RFD-09 on 8th July, 2026. The Respondent No.3 without granting any personal hearing as mandated by the provisions to Rule 92(3) of the CGST/ MGST Rules, 2017 rejected the application for refund by the impugned Order passed on 14th July, 2026. Hence, the present Petition.
3. Learned Counsel for the Petitioner has drawn our attention to Judgment and Order dated 28th August, 2026 passed by this Court in IBM India Pvt. Ltd. Vs. Union of India and Ors. in Writ Petition (L) 38052 of 2025 where this Court had taken a view that under the erstwhile indirect tax regime, the amount paid as a condition precedent for hearing of Appeal bears a character of security deposit and not duty. Paragraph No.11 of the said Order is reproduced as under:
“11. It is pertinent to note that under the erstwhile indirect tax regime, the amount paid as a condition precedent for hearing an appeal, did not bear the character of duty but bears the character only of a security deposit, being a statutory condition precedent for hearing of the appeal. Such an amount needs to be returned to the concerned appellant, whether the appellant succeeds fully or partly. If any authority is needed in support of this proposition, we may refer to Nelco Limited Vs. UoI (2002 (144) E.L.T. 56 (Bom.)] maintained in 2002 (144) E.L.T. A104 (S.C.)].
4. Learned Counsel for the the Petitioners pointed out that once the proceedings in rectification application under Section 161 of the MGST Act have attained finality, the refund application ought to have been granted.
5. Learned Counsel for the Respondent-Revenue strongly opposed the Petition.
6. Heard learned Counsel for the parties. The Rectification Application filed by the Petitioner was finally decided on 16th April, 2026. The demand was reduced to Rs.5,648/-. There is a finality attached to this proceeding in as much as it is nobody’s case that this Order was challenged further. It is also an admitted fact that the Petitioner had paid an amount of Rs.19,61,750/- being pre-deposit while preferring the First Appeal under Section 107 of the MGST Act. Taking into the consideration the law laid down by this Court in IBM India Pvt. Ltd. Vs. Union of India and Ors. (supra) passed on 28th August, 2026 and further taking into consideration the fact that the amount of pre-deposit is lying with the Respondent, we are inclined to allow the present Petition. Hence, the following Order:
ORDER
(i) Writ Petition No.4310 of 2026 is allowed.
(ii) The impugned Refund Rejection Order dated 14th July, 2026 in Form GST RFD-06 which is at Exhibit-G passed by the Respondent No.3 Order dated 14th July, 2026 is quashed and set aside.
(iii) The Respondents are directed to forthwith sanction and disburse the refund of Rs.19,61,750 to the Petitioner pursuant to Form GST-RFD-01 and the same amount to be refunded to the Respondents within a period of six weeks from the date of communication of the present Order.
7. In view of above, Writ Petition No.4310 of 2026 stands disposed of.
