Case Note & Summary
The writ petition arose from the rejection of a refund claim for GST pre-deposit following partial appellate success. IBM India Pvt. Ltd., the petitioner, challenged an order dated 26 August 2025 passed by the Deputy Commissioner of State Tax, which rejected its refund application under Form GST RFD-01. The petitioner had been subjected to an adjudication order dated 21 February 2024 confirming a tax demand of Rs.48,96,54,949. Aggrieved, the petitioner filed a first appeal under Section 112 of the Maharashtra Goods and Services Tax Act, 2017 before the Joint Commissioner of State Tax (Appeal-1). By order dated 17 March 2025, the First Appellate Authority partly allowed the appeal and dropped 64% of the demand, reducing the confirmed amount to Rs.17,50,70,729. The petitioner then sought refund of Rs.3,14,58,422, being 10% pre-deposit paid under Section 107(6) of the MGST Act on the dropped demand of Rs.31,45,84,219. The refund application was filed on 9 July 2025. A show cause notice dated 22 July 2025 proposed rejection on the ground that the appellate proceedings had not attained finality because the petitioner intended to challenge the appellate order before the GST Appellate Tribunal under Section 112 of the MGST Act. The petitioner replied on 5 August 2025, contending that it sought refund only for the dropped portion and relied on Circular dated 16 September 2014 and decisions of Delhi and Jharkhand High Courts. The Deputy Commissioner rejected the claim, relying on Circular No. 125/44/2019-GST dated 18 November 2019 and distinguishing the cited cases on the ground that the assessee itself contemplated further appeal, so finality was absent. The High Court examined the legal question whether refund of pre-deposit could be denied merely because the assessee intended to challenge the confirmed portion of the appellate order. The court reasoned that the department had not filed any appeal against the dropped demand of Rs.31,45,84,219; therefore, to that extent, the appellate proceedings had attained finality. The authority’s reasoning that no finality existed because the petitioner proposed to challenge the remaining confirmed demand was held to be fallacious. The court emphasized that pre-deposit is a security deposit, not duty, and must be returned when an appellant succeeds fully or partly, citing Nelco Limited vs. UOI. The court held that once the demand of Rs.31,45,84,219 stood set aside, a statutory right accrued to the petitioner to receive refund of the proportionate pre-deposit with interest, though the petitioner gave up its interest claim. The continued retention of the pre-deposit was declared unauthorized and violative of Article 265 of the Constitution. The court also noted that the appellate order was binding on the Deputy Commissioner under Section 107(16) of the CGST Act. Consequently, the writ petition was allowed, the impugned order was quashed, and the respondents were directed to process and refund Rs.3,14,58,422 within six weeks from the date of communication of the order.
Headnote
A) GST - Refund of Pre-Deposit - Section 54, Maharashtra Goods and Services Tax Act, 2017; Rule 92(3) MGST Rules, 2017 - Refund of pre-deposit cannot be denied merely because assessee intends to challenge the confirmed part of appellate order - The Adjudicating Authority confirmed demand of Rs.48,96,54,949 which was reduced to Rs.17,50,70,729 in appeal, dropping Rs.31,45,84,219; petitioner sought refund of 10% pre-deposit on dropped amount Rs.3,14,58,422. The Deputy Commissioner rejected refund on ground no finality due to assessee's proposed appeal to GST Appellate Tribunal. The High Court held that to the extent demand was dropped, proceedings attained finality and refund is admissible; impugned order was quashed and refund directed within six weeks (Paras 7-10, 15). B) GST - Appellate Finality and Circular No. 125/44/2019-GST dated 18.11.2019 - Section 107(6), 112(8) Maharashtra Goods and Services Tax Act, 2017 - Circular requires finality of appellate proceedings before refund of pre-deposit - Authority misconstrued finality as requiring assessee not to appeal any part; finality operates demand-wise or issue-wise, not globally. Assessee's challenge to remaining Rs.17.50 crore does not deprive finality of dropped Rs.31.45 crore. Held that reasoning was fallacious and refund cannot be withheld (Paras 9-10). C) Constitution of India - Taxation and Unauthorized Retention - Article 265 - Pre-deposit is security deposit not duty; once demand set aside, statutory right to refund accrues - Continued retention of pre-deposit after demand dropped is unauthorized and offends Article 265; interest claim was given up by petitioner on instructions. Held that refund of principal amount must be processed (Paras 11-14). D) GST - Binding Nature of Appellate Order - Section 107(16), Central Goods and Services Tax Act, 2017 - Order in Appeal setting aside demand is binding on Deputy Commissioner - Since appellate authority dropped demand of INR 31,45,84,219 and no departmental appeal was filed against that part, Respondent No.3 could not refuse consequential refund of pre-deposit attributable to set-aside demand. Held that refusal was contrary to law (Paras 8, 13). E) Legal Precedent - Pre-Deposit As Security Deposit - Nelco Limited vs. UOI - Under erstwhile indirect tax regime, pre-deposit does not bear character of duty but security deposit for hearing appeal - Such amount must be returned whether appellant succeeds fully or partly. High Court relied on this principle to allow refund (Para 11).
Issue of Consideration
Whether refund of pre-deposit paid under Section 107(6) of Maharashtra Goods and Services Tax Act, 2017 can be denied on the ground that appellate proceedings have not attained finality solely because the assessee intends to appeal the remaining confirmed demand, though the demand to the extent dropped has attained finality.
Final Decision
Writ petition allowed; impugned order dated 26 August 2025 quashed and set aside; refund application to extent of Rs.3,14,58,422 to be processed and refunded within six weeks from communication of order; interest claim not pressed.
Law Points
- Pre-deposit under Section 107(6) of MGST Act is a security deposit
- not duty
- and must be refunded when assessee succeeds fully or partly
- refund of pre-deposit cannot be withheld merely because assessee contemplates further appeal against the portion of demand confirmed
- finality of appellate proceedings is to be assessed issue-wise or demand-wise
- not globally
- retention of pre-deposit after demand set aside offends Article 265 of the Constitution
- Circular No. 125/44/2019-GST dated 18.11.2019 permits refund only after appellate proceedings attain finality to the extent in issue
