GST Appeal Pre-Deposit Refund Not Hit By Limitation Applicable To Other Refunds: Supreme Court

The Supreme Court has clarified that a taxpayer is entitled to a refund of the amount deposited for filing a GST appeal once the appeal succeeds. It has further held that such a refund cannot be denied by applying the general GST refund law or its limitation period.

The court held that the refund of a mandatory pre-deposit flows from the appellate mechanism itself and not from the general refund provisions (Section 54) of the GST law.

A bench of the Supreme Court of India comprising Justices Sanjay Kumar and K. Vinod Chandran made the clarification while disposing of an appeal filed by the State of Jharkhand against a judgment of the Jharkhand High Court.

The bench agreed with the State's submission that the refund sought by the assessee was of a statutory pre-deposit made for filing an appeal and not a refund governed by Section 54.

"We are in agreement with the submission made by the learned senior counsel that the subject refund was relatable to Section 107(6) read with Section 115 of the Jharkhand GST Act, and to that extent, the exercise undertaken by the High Court with regard to Section 54 thereof was unnecessary.", the Court observed. 

The case traces back to a GST demand raised against BLA Infrastructure Pvt. Ltd., a company engaged in coal loading, unloading and transportation. In January 2021, the GST department issued a show cause notice to the company, alleging a mismatch between different GST returns filed for September 2019. This was followed by an ex parte assessment order on 31 August 2021, which raised a GST demand of about Rs 16.9 lakh, covering tax, interest, and penalty.

BLA Infrastructure challenged the demand before the appellate authority after making the mandatory pre-deposit for filing appeals as stipulated by the Act.

The appeal was allowed on February 9, 2022, with the appellate authority setting aside the tax demand. As a consequence, the company became entitled to a refund of the amount deposited at the time of filing the appeal.

The refund, however, was not processed. On September 11, 2024, more than two years after the appeal was allowed, BLA Infrastructure applied for a refund of the pre-deposit. The tax department rejected the claim through a deficiency memo in November 2024 based on its view that the application was barred by the two-year limitation period prescribed under Section 54 of the GST Act.

Aggrieved by the rejection, BLA Infrastructure approached the Jharkhand High Court. By a judgment on January 30, 2025, the High Court ruled in favour of the taxpayer and directed the State to refund the pre-deposit along with interest. It held that the time limit under Section 54 was directory and could not be invoked to deny a refund of a statutory pre-deposit once the appeal had succeeded.

The State of Jharkhand thereafter carried the matter to the Supreme Court.

During the hearing, the State itself submitted that a refund of a pre-deposit made for filing an appeal does not fall under Section 54, and that the High Court's examination of that provision was unnecessary in the context of a statutory pre-deposit.

It submitted that such refund is governed by the appellate provisions of the GST law, specifically Section 107(6), which deals with mandatory deposits for appeals, read with Section 115, which provides for refund of amounts paid under the Act.

Accepting this submission, the Supreme Court held that the High Court was not required to examine or interpret Section 54 while dealing with the refund of a statutory pre-deposit.

The court clarified that refund of such deposit is a consequence of the assessee succeeding in appeal, and the general refund provision, including its limitation period, has no application in such cases.

While upholding the direction to refund the amount, the Supreme Court set aside the High Court's detailed reasoning on Section 54, observing that the exercise was unnecessary in the facts of the case. However, the court directed the State of Jharkhand to refund the pre-deposit along with applicable interest within four weeks.

Case Title: State of Jharkhand & Ors. v. BLA Infrastructure Private Limited

Case Number: Diary No. 56452/2025

Citation: 2026 LLBiz SC 5

For the Petitioner/State: Senior Advocate Arunabh Choudhary with Advocates Pallavi Langar, Pragya Baghel, Sujeet Kumar Chaubey