The Hon’ble Delhi High Court in Alkesh Tacker HUF v. Union of India & Ors., [W.P.(C) 2486 of 2025, dated August 12, 2025] set aside rejection of refund of unutilized Input Tax Credit (“ITC”) worth Rs. 10.05 lakhs on zero-rated exports. The Court held that the Department’s ground that the Letter of Undertaking (“LUT”) was filed “after exports” was specious and untenable, since actual exports commenced only post filing of LUT. The Court reiterated that refund claims on zero-rated supplies, governed by Rule 89 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) and Circular No. 125/2019, are in the nature of incentives to exporters and cannot be arbitrarily withheld.
Facts:
Alkesh Tacker HUF (“the Petitioner”), engaged in exports of cordless sets and other goods, filed a refund application on 12 August 2023, seeking refund of INR 10,05,341/- (ITC accumulation on zero-rated supplies for Sep–Dec 2021).
The CGST Department (“the Respondent”) issued a Show Cause Notice (“SCN”) sought multiple documents including declarations under Section 54(3), CGST Act proviso, undertakings under Sections 16(2)(c), CGST Act and Section 42(2) CGST Act, statements under Rule 89(2) & (4) of the CGST Rules, LUT, and CA Certificate.
The Petitioner demonstrated that exports actually commenced after filing of LUT. Despite submission of all documents, the Refund Rejection Order (“Impugned Order”) denied the claim on the sole ground that the LUT was filed post the refund period.
Aggrieved by the impugned order, the Petitioner approached the High Court under Articles 226 and 227 of the Constitution of India.
Issue:
- Whether refund of ITC on zero-rated exports can be denied on the ground that the LUT was filed after the refund period, when in fact, exports were made only subsequent to LUT filing?
Held:
The Hon’ble Delhi High Court in W.P.(C) 2486 of 2025 held as under:
- Held that, Rule 89 of the CGST Rules read with Circular No.125/2019 makes it clear that documents filed with refund applications are sufficient to establish entitlement.
LUT dated August 26, 2021 was filed prior to the actual date of first export. Hence, the ground taken by the Department was factually incorrect and legally untenable. - Noted that, Refunds on zero-rated supplies are intended as incentives to exporters and cannot be denied on hyper-technical grounds.
- Opined that, withholding refund in such circumstances is contrary to the scheme, spirit, and letter of law under the CGST framework.
- Directed that, refund to be processed with statutory interest within 2 weeks, failing which enhanced interest @12% p.a. would be payable beyond 3 September 2025.
Our Comments:
The Delhi High Court’s ruling in Alkesh Tacker(Supra) reinforces judicial intolerance towards arbitrary denial of exporter refunds. The Court has clarified that zero-rated supplies occupy a special position under GST, and incentives in the form of refunds cannot be thwarted by procedural or misconstrued technical objections.
The judgment serves as a precedent against departmental delay and frivolous SCNs in refund adjudication. Exporters can rely on this ruling to challenge rejection of refunds where compliance is substantially met, especially in relation to Rule 96(A), CGST Rules LUT requirements.
The Judgement of the Court goes in the similar parlance as the holding of the Hon’ble Gujrat High Court in the matter of Jal Engineering vs. Union of India, [W.P. (C) 5040 OF 2021 dated December 16, 2021 and Amit Cotton Industries vs. Principal Commissioner of Customs, reported in (2019) 107 taxmann.com 167 (Guj.)
Similar to the above-mentioned cases, the case in hand, also revolves around zero-rated supplies and the legitimacy of a refund despite technical objections. The holding that shipping bills are a sufficient basis for refunds supports the Delhi HC’s ruling in Alkesh Tacker (Supra).
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