Refund cannot be appropriated against a demand for which statutory pre-deposit has been made and appeal is pending; appropriation of ₹64 lakh reversed: Bombay High Court

The Court held that once the prescribed pre-deposit of 20% of the disputed demand has been made and an appeal has been filed, recovery of the balance demand stands stayed by operation of law under Section 112(8) and 112(9), and the Department cannot circumvent this statutory stay by adjusting the taxpayer's separate refund claims against the stayed demand.

The Bombay High Court has directed the reversal of an appropriation of ₹64,01,750 from a refund sanctioned under Section 54 of the CGST Act, which the Department had adjusted against an outstanding demand for Financial Years 2017-18 to 2019-20, holding that the adjustment was contrary to the statutory stay of recovery that operates once the prescribed pre-deposit has been made [Trivitron Healthcare Private Limited v. Deputy Commissioner, Division-VI, CGST & Central Excise Commissionerate, Belapur].

The petitioner had filed an appeal before the First Appellate Authority against an assessment order raising a demand of ₹1,12,34,474 and had deposited 10% of the disputed amount as pre-deposit. After the first appeal was dismissed, the petitioner communicated its intention to file a further appeal before the GSTAT. Following the issuance of CBIC Circular No. 224/18/2024-GST dated 11 July 2024, which clarified that recovery would remain stayed on payment of the prescribed pre-deposit, the petitioner paid a further 10%, completing the full 20% pre-deposit for the Tribunal appeal. Meanwhile, the petitioner filed a separate refund application for the period July to September 2023, and the Department determined a net eligible refund of ₹64,01,750. Instead of sanctioning the refund, the Department adjusted the entire amount against the assessment demand for the earlier financial years. The petitioner's rectification application pointing out this error was rejected without reasons.

Justice M.S. Karnik and Justice Sandesh D. Patil held that the petitioner had discharged the entire statutory pre-deposit of 20% of the disputed demand — 10% at the first appellate stage and a further 10% for the Tribunal appeal. By virtue of Section 112(8) and 112(9) of the CGST Act read with CBIC Circular No. 224/18/2024-GST, recovery of the balance 80% of the demand stood stayed by operation of law. In such circumstances, it was not open to the Department to effectively recover a portion of the stayed demand by the indirect route of adjusting an unrelated refund against it.

The Court directed that the appropriation of ₹64,01,750 be reversed and the amount restored to the petitioner within four weeks. The Revenue's objection that the proceedings were not maintainable because the trade name in the GST records had been amended was left for the Tribunal to decide, the Court noting that the GST Registration Number — the only unique controlling identifier — had always been the same. The decision is directly relevant for taxpayers who have complied with pre-deposit requirements and have unrelated refund claims pending or sanctioned, as the Department cannot use the refund machinery to circumvent the statutory protection of recovery stay.

2026-juristway.com-2895-HC(Bombay)-GST  |  High Court of Bombay  |  Writ Petition No. 12365 of 2026  |  07.10.2026