The Supreme Court in the case of Special Commissioner, Zone 11 & Ors. v. Hybon Technologies Private Limited [SLP Diary No. 21165 of 2025, order dated August 29, 2025] dismissed the appeal filed by the revenue authorities against the Delhi High Court order, which held that the authority under Section 16 of the IGST Act read with Section 54 of the CGST Act does not empower revenue officers to examine the admissibility of Input Tax Credit (ITC) while adjudicating refund claims.
Facts:
In the Delhi High Court case of Hybon Technologies Private Limited v. Special Commissioner, Zone 11 & Ors. [W.P.(C) 3137/2025, order dated March 18, 2025], the Hybon Technologies Private Limited (“the Petitioner”) filed a claim for refund of ITC accumulated under the GST regime. During adjudication, revenue authorities examined and disputed admissibility of the ITC as part of the refund claim process.
The Special Commissioner, Zone 11 & Ors. (“the Respondent”) rejected the refund claim primarily by scrutinizing the ITC admissibility, leading to denial of refund.
The Petitioner contended that the statutory provisions governing refund do not authorize revenue to decide issues of ITC eligibility or admissibility during refund adjudication under Sections 16 and 54 of the Integrated GST and CGST Acts, respectively.
According to the Petitioner, ITC eligibility should be determined separately through appropriate assessment/ adjustment proceedings.
The Respondent contended that the issues relating to claim of ITC arise inherently when refund claims are adjudicated under the GST law, and hence, revenue has jurisdiction to examine ITC admissibility during refund adjudication. The Respondent also raised a preliminary maintainability objection citing the existence of alternate remedy in the form of departmental appeal.
Aggrieved by the refund denial and maintainability objection, the Petitioner filed a writ petition before the Delhi High Court under Article 226, challenging both the process and the scope of revenue authority during refund adjudication.
The Respondent (Revenue) challenged this order before the Supreme Court by filing a Special Leave Petition (SLP), arguing that the High Court should not have entertained the writ petition where statutory appeal was available and that it erred on the jurisdictional question.
Issue:
Whether the Revenue authorities can examine and decide on the admissibility of Input Tax Credit (ITC) while adjudicating a claim for refund under the GST law?
Held:
The Hon’ble Delhi High Court held as under:
- Observed that, the question of revenue’s jurisdiction to decide ITC admissibility during refund adjudication strikes at the very foundation of the impugned orders and is substantial enough to warrant judicial examination.
- Rejected the preliminary objection raised by the revenue authorities on maintainability grounds, holding that the writ petition is maintainable since the issue raised is not merely factual but legal and constitutional in nature.
- Noted that, the Section 16 of the IGST Act and Section 54 of the CGST Act, delineate the processes for refund claims and specify the scope of adjudication, which, according to the petitioner, excludes ITC eligibility determination.
The Hon’ble Supreme Court upheld the Delhi High Court’s decision as under:
- Held that, there is no good reason to interfere with the Delhi High Court’s order that entertained the writ petition challenging revenue’s authority to decide ITC admissibility during refund adjudication.
Our Comments:
The Delhi High Court’s refusal to accept revenue’s maintainability objection is consistent with the principle that constitutional remedies under Article 226 remain available where substantial questions of law or jurisdiction are involved, particularly on revenue’s power limits. Upholding writ maintainability paves way for judicial scrutiny into important procedural facets of GST functioning. The core legal contention here, is whether ITC admissibility can be adjudicated within refund proceedings and is critical for GST compliance and procedural clarity. The revenue’s approach risks conflating refund adjudication with credit assessment, potentially hindering timely and efficient refunds.
Relevant Provisions:
Section 16, Integrated Goods and Services Tax Act, 2017:
16. Zero rated supply.-
(1) “zero rated supply” means any of the following supplies of goods or services or both, namely: –
(a) export of goods or services or both; or
(b) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non- realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed….”
Section 54, Central Goods and Services Tax Act, 2017:
“54. Refund of tax.-
(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in such form and manner as may be prescribed.
(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of 1[two years] from the last day of the quarter in which such supply was received.
(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than-
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”
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