Facts of the Case

The petitioner, Harbhajan Singh Thukral, engaged in trading motor parts and mobiles, sought refund of Rs. 9,09,727 along with interest, representing excess balance in his electronic cash ledger. Though the Jurisdictional Officer had accepted the refund application on 12.04.2023, the amount was instead adjusted against an outstanding liability of Rs. 10,71,941 vide order dated 18.09.2023. The department's counsel later informed the Court that a demand of Rs. 12,10,668, against which the refund had been appropriated, had itself been cancelled and communicated to the GST Commissionerate, Palam.

Issues Involved

  1. Whether a taxpayer is entitled to refund of an amount from his electronic cash ledger that was wrongly adjusted against a demand which the department itself had already cancelled.
  2. What relief follows where the cancellation order was never uploaded on the AIO portal, causing continued appropriation of the sanctioned refund.

Petitioner's Arguments

  • The refund application for the excess balance in the electronic cash ledger had already been accepted by the Jurisdictional Officer, but the sanctioned amount was wrongly appropriated towards an outstanding liability.
  • Since the department itself confirmed that the underlying demand had been cancelled, the petitioner was entitled to release of the wrongly adjusted refund along with statutory interest.

Respondent's Arguments

  • The department's counter affidavit admitted that the liability against the petitioner stood cancelled vide order dated 24.07.2023 in FORM GST DRC-08A, but explained that this cancellation order was never uploaded on the AIO portal, which resulted in the erroneous appropriation of the sanctioned refund amount.

Court Order / Findings

  • Given the department's own admission that the demand underlying the appropriation had been cancelled well before the appropriation orders, and that the omission to upload the cancellation on the AIO portal was a departmental lapse, the Court held that the petitioner was entitled to refund of the wrongly adjusted cash ledger balance along with statutory interest, since there was no longer any outstanding liability to justify the appropriation.
  • The department was directed to process the refund application and pay the refund with statutory interest within two months.

Important Clarification

  • A refund sanctioned from a taxpayer's electronic cash ledger cannot continue to be withheld or adjusted once the department's own records show the underlying demand was cancelled, even if that cancellation was not reflected on the department's internal AIO portal due to an administrative lapse.
  • Such wrongly adjusted refunds are payable with statutory interest, since the delay stems from the department's own failure to synchronise its cancellation orders across systems, not any default of the taxpayer.

Sections Involved

  • Section 54, CGST Act, 2017 - refund of tax, including refund of excess balance in the electronic cash ledger.
  • Section 56, CGST Act, 2017 - interest on delayed refunds.

Decision – In Favour of

Decided in favour of the assessee; refund with statutory interest directed within two months.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case No.: W.P.(C) 3967/2025
  • Coram: Justice Prathiba M. Singh and Justice Shail Jain
  • Date: 20th August, 2025

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.