GST Refund Cannot Be Withheld Merely Due to Belated Departmental Appeal

The Punjab & Haryana High Court has directed the Revenue to release a GST refund sanctioned in favour of J K Cement Works, holding that a sanctioned refund cannot be withheld merely because the Department has subsequently filed an appeal before the GST Appellate Tribunal.

Case Background

In J K Cement Works v. Commissioner Central Goods and Services Tax and Another, CWP No. 29456 of 2025 (O&M), decided on 28 July 2026, the petitioner, a cement manufacturing company having a manufacturing unit at Jharli, Haryana, approached the High Court for release of its sanctioned GST refund.

The key facts were:

• The petitioner had obtained an order allowing its refund claim on 29 September 2022.

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• Despite the refund being sanctioned, the amount was not credited to the petitioner even after nearly four years.

• The Revenue stated that it had challenged the refund order before the GST Appellate Tribunal under Section 112 of the Central Goods and Services Tax Act, 2017.

• The departmental appeal was presented before the Tribunal only on 27 March 2026.

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• No date for hearing of the departmental appeal had been fixed when the matter came before the High Court. 

High Court's Decision

The Division Bench comprising Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor held that, in the circumstances of the case, the refund could not be withheld merely because the Revenue had filed an appeal before the Appellate Tribunal.

The Court took particular note of the substantial delay between the refund order dated 29 September 2022 and the Department's filing of its Tribunal appeal on 27 March 2026. Since the appeal had not even been listed for hearing, the mere existence of such an unlisted appeal was not considered sufficient justification for keeping the sanctioned refund unpaid. 

The Court also observed that the petitioner was an established cement manufacturing company and could not be regarded as a "fly-by-night operator". Accordingly, the Court directed the Revenue to release the refund.

Safeguard for Revenue

The direction was not unconditional. The petitioner was required to furnish an undertaking that, if the Department ultimately succeeded in its appeal and any liability became payable, the petitioner would deposit the amount in accordance with law.

Upon furnishing the undertaking and a certified copy of the High Court's order, the Revenue was directed to release the refund within six weeks. 

Relevant GST Provisions

Section 54 of the CGST Act, 2017 governs refund of tax, interest, penalty, fees and other eligible amounts. The statutory framework provides for processing and sanction of refund claims, subject to the conditions prescribed under the Act and the CGST Rules. 

Section 56 deals with interest on delayed refunds. It provides for interest where a refund ordered under Section 54(5) is not paid within the prescribed period, subject to the conditions specified in the provision. 

Section 112 provides for appeals to the GST Appellate Tribunal against specified orders of the Appellate Authority or Revisional Authority. The Government also issued Notification dated 17 September 2025 prescribing 30 June 2026 as the date up to which appeals could be filed in specified cases where the relevant order had been communicated before 1 April 2026.

Key Takeaways for Taxpayers

This judgment provides an important practical safeguard for taxpayers:

• A refund that has already been sanctioned should not ordinarily remain blocked indefinitely merely because the Department has preferred a further appeal.

• The timing and status of the departmental appeal can be relevant when considering whether continued withholding of the refund is justified.

• A taxpayer facing prolonged non-payment of a sanctioned refund may consider appropriate legal remedies, depending on the facts of the case.

• The High Court's direction demonstrates that release of the refund can be protected by an undertaking to repay the amount if the Revenue ultimately succeeds.

• Taxpayers should maintain complete records of refund applications, sanction orders, appeal proceedings and communications with the Department.

Conclusion

The decision in J K Cement Works v. Commissioner CGST reinforces the principle that a sanctioned GST refund should not be kept outstanding indefinitely merely on the basis of a delayed and unlisted departmental appeal. The judgment is particularly relevant for established businesses facing prolonged blockage of legitimate tax refunds.

For expert guidance on this topic, contact your tax professional today.

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