Refund Cannot Be Denied by Disregarding Binding High Court Order
Refund cannot be denied when a taxpayer has a favourable High Court ruling and there is no stay or appeal filed by the department. This legal position has been upheld in several judicial decisions, ensuring that taxpayers are not unfairly denied relief due to departmental inaction or internal circulars.
Why This Matters for GST Refund Claims
In many GST refund cases, especially under inverted duty structure, exporters and manufacturers rely on favourable High Court rulings to claim their dues. However, tax officers often cite CBIC circulars or internal instructions to reject refunds—even when courts have ruled in the taxpayer’s favour.
But as per the rule of law, a High Court judgment is binding on the department unless it is stayed or overturned by a higher court.
Legal Basis: What Courts Have Said
Let’s break down the core principle:
- High Court orders are binding on the authorities within their jurisdiction.
- If no stay or appeal is pending, the department must follow the court’s decision.
- Circulars cannot override court judgments.
Key Case Law
| Case | Court | Key Observation |
|---|---|---|
| Wipro Ltd. v. Asst. Commissioner (Madras HC, 2024) | Madras High Court | Refund denial based on circular ignoring court order was quashed. |
| Canon India Pvt Ltd v. CC (SC, 2021) | Supreme Court | Circulars cannot override legal precedent. |
| Sutherland Global Services (Madras HC) | Madras High Court | No refund denial is valid when there is no stay on HC judgment. |
Expert View: Don’t Let Inaction Cost You
If your case is covered by a favourable High Court decision and the department has not filed a stay or appeal, you are legally entitled to claim the benefit. Officers citing circulars or pending “review” by the Board have no authority to deny such refunds.
Tip: Always attach a copy of the High Court order and a declaration that no stay is pending while filing the refund claim.
CBDT and CBIC: Position on Court Orders
Although not always followed on ground, both CBDT and CBIC have clarified through circulars and internal memos that court orders must be respected unless stayed. Here’s an example:
- CBIC Instruction No. 20/2023-GST: Field formations must comply with judicial orders promptly and avoid contempt.
🔗 Link to official CBIC instructions
How to Respond If Refund Is Denied
If your refund is denied despite a valid court order:
- File a reply quoting the judgment in your jurisdiction.
- Mention Article 226 and Article 141 of the Constitution—High Court orders are binding under Article 226.
- Use RTI to check if the department has filed a stay.
- If needed, file a contempt petition or a writ for enforcement.
Subheading with Keyphrase: Refund Cannot Be Denied When Court Order Exists
Here’s a simplified example:
You claimed GST refund on input credit for inverted duty. The High Court in your state ruled this is valid. CBIC circular says otherwise. No stay is filed.
Result: Refund cannot be denied. Officer must comply with the High Court.
Practical Example
Let’s say you’re a textile exporter from Tamil Nadu:
- You claimed refund under inverted duty structure.
- Madras High Court allowed refund in a similar case.
- GST officer refuses citing CBIC Circular No. 181/13/2022-GST.
✅ You can quote Wipro Ltd. v. ACST and demand refund.
✅ If needed, file a writ—courts have consistently ruled in favour of taxpayers.
Summary
Refund cannot be denied if a binding High Court order supports the taxpayer and no stay or appeal is pending. Circulars cannot override court rulings. Taxpayers can demand enforcement and seek relief under Article 226.
FAQs
Q1. What if the department says they are “reviewing” the court order?
That is not a valid reason. Unless a stay is obtained from a higher court, refund must be granted.
Q2. Can I file refund again if it was wrongly denied earlier?
Yes, if limitation allows. Or you can file a writ petition for enforcement.
Q3. What if my state has no ruling, but another state’s High Court allowed refund?
It’s persuasive but not binding. Best to file writ in your state High Court.
Final Thoughts
If refund is denied despite court order, don’t give up. Assert your rights using the legal framework and precedents. At Efiletax, we help clients draft refund replies, represent in GST disputes, and even coordinate writ filings if needed.