Refund cannot be withheld without specific order under Section 54(11) Commissioner must issue SCN and pass a reasoned order { KPIL-JWIL Joint Venture v. State of Bihar, [2026] 189 taxmann.com 1002 (Patna)}
Facts
The petitioner, a works contractor, claimed a refund of the excess balance lying in its electronic cash ledger for FY 2022–23. The refund was initially rejected on the ground of allegedly ineligible ITC and other dues. Although the appellate authority set aside the rejection, the Revenue pursued further proceedings.
When the petitioner filed a fresh refund claim, the proper officer issued RFD-03 under Rule 90(3), citing previous-year dues as the reason for withholding/rejecting the refund. However, the Commissioner had not initiated proceedings under Section 54(11) for withholding the refund.
Issue
Whether the refund could be withheld without initiating proceedings and passing an order under Section 54(11) of the CGST/BGST Act.
Held
The Patna High Court held that withholding of the refund was not justified in the absence of proceedings under Section 54(11). The RFD-03 issued under Rule 90(3) could not substitute the specific proceedings contemplated under Section 54(11).
The Commissioner was directed to issue a proper notice, provide an opportunity of hearing, and pass a reasoned order deciding whether the refund should be paid or withheld during the pendency of the appeal before the GST Appellate Tribunal.
