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2025 Supreme(Jhk) 1787
IN THE HIGH COURT OF JHARKHAND AT RANCHI
TARLOK SINGH CHAUHAN, CJ., RAJESH SHANKAR, J.
M/s. GTL Infrastructure Limited - Appellant
Versus
The State of Jharkhand - Respondent
W.P. (T) No. 5035 of 2024
Decided on : 20-08-2025
Advocate Appeared:
For the Appellant :Mr. Nitin Kumar Pasari, Advocate
For the Respondents: Mr. Ashok Kumar Yadav, Sr. SC 1
The interpretation of 'may' in Section 54 of the GST Act is directory, affirming the right to refund upon a favorable appeal, and retaining pre-deposit funds contravenes constitutional tax law principles.
Headnote:(A) Goods and Services Tax Act - Section 54 - Refund of pre-deposit amount - Application for refund rejected as time-barred; court held that the provision allowing non-refund is directory, not mandatory - Appellate rights of the assessee affirmed, and retention of pre-deposit amounts leads to undue enrichment of the State. (Paras 17-21)
(B) Constitutional Law - Article 265 - Taxation cannot occur without authority of law - Retaining of the pre-deposit without justification found to contravene constitutional mandates. (Paras 1, 5)
(C) Judicial Precedent - Court binds to its own precedents; persuasive value of other High Court decisions discussed. (Para 4)
Facts of the case:
The petitioner applied for a refund of a pre-deposit amount, which was rejected by the State's automated system on the ground of limitation under Section 54 of the Goods and Services Tax Act. Issues arose about whether this limitation was mandatory and the implications of withholding refunds post-appeal.
Findings of Court:
The court found that the language of Section 54 indicates that while refund applications should be made within two years, withholding such pre-deposits contradicts the legal rights vested in the assessee post-appeal. The court ordered the respondents to refund the amount within four weeks, failing which statutory interest would apply.
Issues: The critical issues were whether the limitation provision in Section 54 was mandatory, and if retaining of the pre-deposit by the State was legal under Article 265 of the Constitution.
Ratio Decidendi: The term 'may' within Section 54 was interpreted as directory, granting discretion to the court on appeal regarding the refund process. The fundamental right to a refund was affirmed, with the court condemning practices that would unjustly enrich the State at the cost of the taxpayer.
Result: Petition allowed; pre-deposit amount to be refunded with interest.
JUDGMENT :
1. The instant petition has been filed for grant of following reliefs:
(a) For issuance of an appropriate writ, order or direction, directing upon the Respondents to show cause as to why the refund application of the Petitioner has not been processed which pertains to refund of the pre-deposited amount with the government exchequer in order to maintain the appeal under Section 107 of the Act.
(b) Consequent upon showing cause, if any, and on being satisfied that the Respondents were obligated to grant refund of the pre-deposit amount and the refund application of the Petitioner could not have been automatically rejected on the ground of being time barred, the Respondents be directed to refund the amount of pre-deposit forthwith along with statutory interest.
(c) For issuance of an appropriate writ, order or direction, holding and declaring that once the appeal preferred by the assessee is allowed, withholding of the pre-deposit amount without any reasonable cause would be hit by Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law.
(d) For issuance of an appropriate writ, order or direction, quashing and setting aside the deficiency memos issued in Form GST RFD-03 dated 07.06.2024 (Annexure-6) and 02.08.2024 (Annexure-8) being wholly illegal and arbitrary.
2. The application for refund of pre-deposit amount has been rejected through an automated order dated 07.06.2024 on the ground of limitation as prescribed under section 54 of the CGST/Jharkhand GST Act.
3. The moot question is whether the said provision is mandatory. The question is no longer res-integra as regards this Court and has been authoritatively decided by the Division Bench of this Court in W.P.(T) No. 6527 of 2024, the case title M/s.BLA Infrastructure Private Limited v. The State of Jharkhand and others, which shall have to be reproduced:
“9.For better appreciation, Section 54 of the Act is hereto quoted for ease:
Section 54 . Refund of tax.-
(1)Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in 1[such form and] manner as may be prescribed.
(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of 1[two years] from the last day of the quarter in which such supply was received.
(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than-
(i)zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:
9 [****]
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
(4) The application shall be accompanied by-
(a) such documentary evidence as may be prescribed to est
