One Year, Multiple Litigations: Delhi HC Orders Immediate GST Refund, Ends Assesses Agony

Delhi High Court, in Truth Fashion vs. Commissioner of DGST Delhi & Ors. (W.P.(C) 486/2025), ordered the immediate release of a GST refund after prolonged litigation. Truth Fashion, a proprietorship firm, initially won a refund appeal for ₹18,33,000, with the appellate authority directing payment by May 10, 2024. Despite a court order on November 18, 2024, instructing the tax department to process the refund within three weeks, the department failed to comply, leading the petitioner to re-approach the court. The tax authorities cited Section 54(11) of the CGST Act, arguing that an intended appeal justified withholding the refund. However, the court ruled that merely planning to file an appeal does not automatically stay a refund order; an actual appeal must be in progress. The court referenced its previous ruling in Alex Tour and Travel (P) Ltd. (W.P.(C) 5722/2023), reinforcing that unless a competent court stays the order, tax authorities must comply. The court found no valid stay or appeal preventing the refund and ruled in favor of the petitioner, ordering an immediate release along with statutory interest under Section 56 of the CGST Act. This judgment underscores the challenges faced by taxpayers due to administrative delays, financial strain, and unnecessary litigation.

The recent judgment of the Delhi High Court in Truth Fashion vs. Commissioner of DGST Delhi & Ors. (W.P.(C) 486/2025) is an important GST litigation discussion, particularly regarding delayed refunds even after the high court order by the department. This case marks the third round of litigation for Truth Fashion, which had previously approached the court in W.P.(C) 15886/2024, decided on 18 November 2024.

Fact, grounds and decisions of the Case

Truth Fashion, a proprietorship firm, applied for the refund of GST amounting to Rs. 18,33,000/- but the department rejected it so they appealed to Appellate Authority(1) and won and the appellate authority ordered the refund to be released by10 May 2024. Despite this, the department did not pay. So, petitioner appealed to High Court, despite a directive from the Delhi High Court on 18 November 2024(2-order copy link given below) to process the refund within three weeks, the tax authorities failed to comply, forcing the petitioner to re-approach the court (3^rd round of appeal).

The main reason given by the department was that they i.e. commissioner had decided to appeal against the appellate authority’s order, citing Section 54(11) (Refund of tax: Ready reference given below) of the CGST Act. This particular section allows the withholding of GST refunds by the department if there is an appeal is pending and the Commissioner believes that releasing the amount may adversely affect revenue of the government due to fraud or malfeasance of the applicant.

1. The court clarified that Section 54(11) applies only when an order giving rise to a refund is already under appeal by the department i.e. appeal is already going on. The mere intention to file an appeal does not automatically stay the refund order i.e. cannot hold or stop refund order. Pending appeal does not imply departments proposes to appeal which is pending due to any reason, it must be under appeal.

2. The court take reference of the very same court ruling in Alex Tour and Travel (P) Ltd. (W.P.(C) 5722/2023) (3. order link given below for ready reference), where it was held that tax department must comply with appellate/court orders unless a competent court explicitly has put stay on the refund order.

3. The High Court again ruled that unless a stay is obtained by the department for holding the refund, the department could not just withhold the refund of any assessee. The court also said that there was no order or appeal from any appellate tribunal or higher authority stopping the refund release by the department.

4. The judgment ordered that the petitioner should receive the refund “forthwith” along with statutory interest as per Section 56 of the CGST Act.

Observation

The Delhi High Court’s ruling in Truth Fashion vs. Commissioner of DGST Delhi is a important judgment for GST refund dispute matter. The High Court again affirm that mere intent to appeal does not justify withholding refunds, the court has provided much-needed relief to the present assessee struggling with refund delays. Also in this case, we have seen that the assessee has to go three rounds of litigation due to department ignorance and even they did not comply with the very high court order and appellate authority order. This case reflects the harassment bear by the assessee along with working capital loss for almost one year without any reason, also they had to bear the litigation cost incurred to get their GST refunds.

For ready reference

Section 54 (11)– Refund of Tax: – Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.”

Order Link for ready reference:

1. Truth fashion order dated 10/02/2025 i.e. present case: https://drive.google.com/file/d/1YrKvdAABuCodLtpNuC08pNaH6318X3qw/view?usp=sharing

2. Truth fashion order dated 18/11/2024: https://drive.google.com/file/d/1MbYqLJwnd99ikuOiBCHR0ivSFIPzO7t9/view?usp=sharing

3. Alex Tour And Travel Private Limited vs/ Assistant Commissioner, CGST, on 8 May, 2023: https://drive.google.com/file/d/1Rge0kdgydRnKeqsqfvkQJEeVgVgVH3Hc/view?usp=sharing