Department Cannot Retain GST if Liability is Disputed and Refund Application is Pending.

The Petitioner purchased rejected wheat and paddy seeds from the Uttarakhand Seeds and Tarai Development Corporation Ltd. (“the Corporation”) in 2017

At the time of purchase, the Corporation deducted ₹10,23,484/- towards GST from the Petitioner’s security deposit

The Petitioner contended that such seeds are exempt from GST unless sold in unit containers under a registered brand name, per an advance ruling in M/s Sam Overseas

After an initial High Court direction in 2020 (WPMS No. 1272 of 2020), the Corporation passed an order on October 16, 2020, acknowledging that the GST was refundable but claiming it had already applied to the State Tax Department for the refund and was awaiting payment

The Petitioner challenged this order seeking a mandamus for the actual refund

1. Whether the Department is entitled to retain GST amounts collected on transactions that are admittedly not exigible to tax.

2. Whether the Petitioner can be denied a refund based on the procedural technicality that an advance ruling is only binding on the applicant.

The Court applied the principle that the State cannot retain tax collected without the authority of law, grounding the decision in the undisputed fact that the transactions in question did not attract GST under the prevailing tax regime

Procedurally, the Court referenced Rule 89 of the GST Rules, which prescribes the filing of Form RFD-01 as the appropriate mechanism for claiming a refund of tax

The Court noted that the Corporation (Respondent No. 5) did not dispute the non-taxability of the rejected seeds or the Petitioner’s entitlement to a refund

While Respondent No. 2 argued that the M/s Sam Overseas advance ruling was only binding on the specific applicant therein, the Court found this irrelevant because the underlying fact—that GST was not payable on these specific transactions—was not in dispute

The Court reasoned that once it is established that the tax was not legally due, the Department cannot be permitted to retain the amount indefinitely

To resolve the procedural deadlock between the Corporation and the Tax Department regarding the refund application, the Court identified the necessity of filing the correct statutory form (RFD-01) to facilitate the movement of funds

The Court disposed of the writ petition by directing the Corporation (Respondent No. 5) to file a refund application in the prescribed Form RFD-01 within two weeks. The Tax Department was directed to refund the amount to the Corporation "forthwith" upon receipt of the application, and the Corporation was subsequently ordered to transit that refund to the Petitioner within two weeks of receipt