Delhi High Court on Withholding GST Export Refunds During Anti-Evasion Investigation

1. Background and Core Dispute

The Delhi High Court in Devi Electronics Pvt Ltd Vs Commissioner CGST Delhi South and Ors. (Delhi High Court) examined whether refund of IGST paid on exports could lawfully be withheld under Section 54(11) of the CGST Act, 2017 in the backdrop of an ongoing anti-evasion investigation.

The writ petition challenged:

  • non-release of a sanctioned refund of ₹3,15,30,605.03, and
  • an order dated 24.09.2024 passed under Section 54(11) withholding the refund.

The assessee had exported goods during November 2023 to January 2024, paid IGST on such exports and filed five separate refund applications aggregating ₹3,15,30,605.03.

While the original refund claims were rejected by the Adjudicating Authority for alleged non-filing of complete documentation, the Order-in-Appeal dated 19.06.2024 allowed all five appeals and effectively sanctioned the refund.

The central question before the Court was:

Whether the Commissioner was justified in invoking Section 54(11) of the CGST Act, 2017 to withhold the refund arising from the Order-in-Appeal in the facts of this case.

2. Factual Matrix in Brief

2.1 Export activity and refund applications

  • The assessee, Devi Electronics Pvt Ltd, engaged in export of electronic items (including microphones, telephone sets, smartphones, monitors, projectors, automatic data processing machines and related accessories) was registered under GSTIN 07AAACD0720F2ZB.
  • During November 2023 to January 2024, goods were exported on payment of IGST.
  • Consequently, five refund applications were filed for:
    • ₹1,35,69,527.58
    • ₹43,11,670.36
    • ₹34,92,046.08
    • ₹67,97,817.00
    • ₹33,59,544.01
    • Total: ₹3,15,30,605.03

2.2 Rejection at original stage and success in appeal

  • The proper officer (Respondent No. 2) issued SCNs proposing rejection of the refund, mainly on grounds of non-submission of requisite documents.
  • Despite replies and supporting records being filed, five Orders-in-Original dated:
    • 01.03.2024
    • 27.03.2024
    • 22.04.2024
    • 25.04.2024
    • 07.06.2024
      rejected all refund claims.
  • On appeal, the Appellate Authority, by Order-in-Appeal dated 19.06.2024, allowed all appeals, holding that the refund claims were wrongly rejected and that the assessee had furnished the required documentation.

2.3 Review and proposed appeal to GSTAT

  • A Review Authority examined the Order-in-Appeal and issued a Review Order dated 23.06.2024 directing that the appellate order be challenged before GSTAT under Section 112(3) read with Rule 111(1) of the CGST Rules, 2017.
  • Since GSTAT had not yet become fully functional, the decision was to file the appeal once the Tribunal started operations.
  • Meanwhile, relying on the Order-in-Appeal, the assessee filed a consolidated refund claim (ARN No. AA070624070785W) on 25.06.2024 for ₹3,15,30,605.03.

2.4 Invocation of Section 54(11) and impugned order

  • In light of the review proposal, the Commissioner (Respondent No.1) examined the matter under Section 54(11) of the CGST Act, 2017.
  • The assessee was granted opportunity of personal hearing through letters dated 27.08.2024 and 03.09.2024, with hearings on 30.08.2024, 05.09.2024 and **09.09.2024`.
  • Thereafter, by order dated 24.09.2024 (referred to as the “Impugned Order”), the Commissioner exercised power under Section 54(11) to withhold the refund arising from the Order-in-Appeal dated **19.06.2024`.

3. Petitioner’s Contentions

3.1 No pending appeal / proceeding on date of withholding

The assessee argued:

  • On 24.09.2024, no appeal was actually pending before GSTAT against the Order-in-Appeal.
  • A mere internal decision or contemplation to file an appeal could not be treated as a “pending appeal” or “further proceedings” for purposes of Section 54(11).
  • The departmental appeal was admittedly filed only on 10.04.2026.

Reliance was placed on:

  • Mandy Enterprises Vs Deputy Commissioner, (2024) 22 Centax 534 (Delhi High Court)
  • Alex Tour And Travel Private Limited Vs Assistant Commissioner, CGST, W.P.(C) No. 5722/2023 (Delhi High Court)

Both decisions emphasise that a refund sanctioned by an appellate authority cannot be withheld simply because the Department proposes to appeal.

3.2 Investigation is not “proceedings” under Section 54(11)

The assessee submitted that:

  • Mere investigation or inquiry, without issuance of a formal notice, does not constitute “proceedings” under the CGST Act, 2017 for the purposes of Section 54(11).
  • Consequently, the existence of an anti-evasion investigation could not satisfy the statutory requirement of “any other proceedings under this Act is pending”.

For this proposition, the assessee relied upon:

  • Liberty Oil Mills Vs Union of India, MANU/SC/0029/1984 (Supreme Court)
  • G.K. Trading Company Vs Union of India, 2021 (51) G.S.T.L. 288 (Allahabad High Court)
  • Srico Projects (P.) Ltd. Vs Telangana State Authority for Advance Ruling, [2022] 142 taxmann.com 5 (Telangana High Court)

3.3 No judicial stay of Order-in-Appeal

Another limb of the argument was:

  • Since there was no stay by any court or tribunal on implementation of the Order-in-Appeal, the Department was bound to give effect to it and release the refund.
  • Withholding the refund was characterised as tantamount to non-compliance with a binding appellate order.

3.4 Timing of show cause notice and nature of proceedings

The assessee also contended:

  • The SCN dated 21.08.2026 (referred to in the record as 24.08.2026 in one place but 21.08.2026 elsewhere) was issued long after the impugned withholding order.
  • As such, it could not be treated as a “pending proceeding” on 24.09.2024.
  • The SCN was unadjudicated and could not override the rights conferred by the favourable Order-in-Appeal.

3.5 Character of the Commissioner’s order and appeal remedy

On the nature of the order and available remedies, it was urged that: