The Bombay High Court has held that where a first appellate authority partially drops a demand — setting aside 64% of the adjudicated liability — the taxpayer's right to refund of the proportionate pre-deposit (10% of the dropped demand) is a statutory vested right that accrues immediately upon the appellate order, and cannot be withheld on the ground that the taxpayer has expressed an intention to appeal the remaining 36% that was confirmed. The ruling, by Justice M.S. Karnik and Justice Sandesh Patil in Writ Petition (L) No. 38052 of 2025 (M/s IBM India Pvt. Ltd., decided 28.08.2026), is a clear articulation of the principle that finality for the purpose of pre-deposit refund must be assessed on a demand-segment basis, not for the appellate proceedings as a whole.
IBM India had received an adjudication order dated 21.02.2024 confirming a demand of Rs. 48.96 crore. It filed a Section 107 appeal, making the mandatory 10% pre-deposit of the full demand. The First Appellate Authority (Joint Commissioner, State Tax, Appeals) partly allowed the appeal on 17.03.2025, setting aside Rs. 31.45 crore of the demand and confirming Rs. 17.50 crore. IBM India then sought a refund of Rs. 3,14,58,422 — representing 10% of the Rs. 31.45 crore dropped portion — under Form GST RFD-01. The department rejected this refund application on a single ground: since IBM India had itself expressed an intention to challenge the confirmed Rs. 17.50 crore demand before the GSTAT (and had accordingly paid the 10% pre-deposit for that tribunal appeal), the appellate proceedings had "not attained finality" — and under CBIC Circular No. 125/44/2019-GST, pre-deposit refund is admissible only when appellate proceedings attain finality.
The court found this reasoning fallacious. The demand set aside (Rs. 31.45 crore) and the demand confirmed (Rs. 17.50 crore) are distinct portions of the original liability. The department had not appealed the setting-aside of Rs. 31.45 crore — meaning that portion of the appeal proceedings had reached finality. The taxpayer's decision to appeal the confirmed Rs. 17.50 crore relates to a wholly separate segment of the dispute. The fact that a taxpayer exercises its statutory right to appeal the portion that went against it cannot operate to deprive it of the refund arising from the portion that went in its favour. Applying this logic, finality must be assessed portion-by-portion, not for the appeal proceedings globally.
The court also applied the principle from Nelco Limited (Bombay HC, affirmed by SC) that statutory pre-deposits bear the character of a security deposit, not a payment of duty — they must be returned to the appellant whether the appeal succeeds fully or partly. Once Rs. 31.45 crore stood set aside, a statutory right to refund of 10% of that amount arose in IBM's favour. Retention of that amount without legal authority offends Article 265 of the Constitution. The impugned order was quashed and the refund of Rs. 3,14,58,422 was directed to be processed and paid within six weeks. IBM India magnanimously waived its claim to interest on the delayed refund, and the court appreciated the gesture.
2026-juristway.com-2366-HC(Bombay)-GST | High Court of Bombay | Writ Petition (L) No. 38052 of 2025 | 28.08.2026