"No GSTAT, No Coercion": Delhi HC shields taxpayer from refund recovery till Tribunal goes live

Case: M/s IKIRAON Technologies Pvt. Ltd. v. Assistant Commissioner, CGST Janakpuri Division & Anr., (Delhi High Court) [2025(09)LCX0180]

Order: Interim protection against coercive recovery after an appellate authority set aside a previously sanctioned refund of Rs. 13.43 crore (Order-in-Appeal dated June 2, 2025)

When appellate doors are shut, writ jurisdiction becomes the safety valve. In a significant interim order, the Delhi High Court has restrained GST authorities from taking coercive recovery steps where a sanctioned refund was later reversed in appeal, until the GST Appellate Tribunal (GSTAT) becomes functional. The Court’s approach recognises the statutory design of a three-tier appeal under the CGST Act, and the practical vacuum created when the second-tier-GSTAT-has not yet been notified or operational.

Background: Refund granted, then reversed IKIRAON Technologies, an electronics trader, had earlier received a GST refund of about Rs. 13.43 crore. According to the petitioner, the refund followed full physical verification of its place of business and submission of all requisite documents. Subsequently, however, the Appellate Authority set aside that refund by an Order-in-Appeal dated 02.06.2025, mainly questioning the adequacy of the verification underpinning the sanction.
Two crucial factual disputes surfaced:

Verification: The petitioner says verification was complete and compliant; the department doubts its adequacy.

Opportunity of hearing: The petitioner suggests a hearing deficit; the department counters that a personal hearing was indeed granted.

With the refund now undone at the first appellate level, the taxpayer faced the spectre of recovery. But the next statutory forum-the GST Appellate Tribunal-was still not operational. Hence, IKIRAON approached the High Court under Article 226, seeking protection until the prescribed appellate remedy becomes real.

What the Court held-at the interim stage

The Delhi High Court acknowledged that an Order-in-Appeal ordinarily lies to the GST Appellate Tribunal under Section 112, CGST Act. Noting that the Tribunal is not yet functional, the Court granted interim protection by restraining coercive steps to recover the refund amount. The Court also:

• Called for a counter affidavit from the department within six weeks;

• Permitted a rejoinder within four weeks thereafter;

• Listed the matter for further hearing after pleadings.

In essence, the Court pressed pause on coercive recovery so that the taxpayer is not left remediless in the interregnum between the appellate authority and a non-existent Tribunal.

Why this matters: the “GSTAT vacuum” problem

The CGST Act contemplates a graded appellate structure:

• Section 107 enables appeals to the Appellate Authority;

• Section 112 provides a further appeal to the Appellate Tribunal within three months or from a notified date (whichever is later).

This very text-“or the date, as may be notified”-is Parliament’s acknowledgement that Tribunal readiness might lag. When it does, limitation stands deferred, but the practical problem remains: how should recovery proceed against an assessee who has a statutory right to contest before a forum that is not available?

High Courts across the country have repeatedly stepped in, using writ jurisdiction to prevent irreparable prejudice. The Delhi HC’s interim order aligns with that line: no coercive recovery when the statutory appellate path is blocked through no fault of the assessee.

Not a final word on merits-yet

It bears emphasis: this is an interim order. The Court has not adjudicated whether the verification was indeed adequate or whether the hearing claimed by the department met statutory standards. Those issues remain open and will be addressed after full pleadings. The Court’s immediate concern was procedural fairness and access to the next appellate tier.

Practical playbook for taxpayers

• 1. Preserve the record: If your refund has been reversed on grounds of verification or procedural deficits, ensure you retain inspection reports, verification memos, site-visit photographs, and complete correspondence submitted during processing.

• 2. Document the hearing position: Keep emails, notices, hearing memos, and submissions that show whether and how a personal hearing was provided and utilised.

• 3. Move the High Court promptly: Where GSTAT is unavailable, a writ petition seeking interim protection (non-coercive recovery) is a tested route. Courts are receptive to preventing hardship when the statutory appellate forum is missing.

• 4. Be Tribunal-ready: Section 112’s structure anticipates a notified start date for Tribunal appeals. Prepare your Tribunal appeal memo and compilation in advance so you can file promptly once the window opens.

• 5. Calibrate cash-flow risks: Erroneous refund recoveries can be large and immediate. Factor possible pre-deposit obligations at the Tribunal stage (when notified) into your liquidity planning, even while interim relief is in place.

Notes for the department

• Avoid over-zealous recovery when the next appellate forum is unavailable. Courts are likely to restrain coercion in such situations.

• Strengthen verification records: If refund reversal is premised on inadequate verification, the appellate file should contain clear, contemporaneous documentation of what was checked, what was missing, and why it mattered.

• Hearing must be real, not ritual: Issue detailed hearing notices, grant reasonable time, and record a speaking order dealing with submissions. This reduces vulnerability at the writ stage.

Key takeaways

• Interim shield against coercive steps: The Delhi HC restrained recovery against a taxpayer whose Rs. 13.43 crore refund was reversed in appeal, pending GSTAT’s functionalization.

• Statutory design respected: The order recognises that an Order-in-Appeal lies to GSTAT, and that taxpayers should not be compelled to suffer recovery without their second-tier appeal.

• Disputes on facts reserved: Adequacy of verification and sufficiency of hearing remain matters for fuller adjudication.

• Process timeline set: Counter affidavit in six weeks, rejoinder in four, and matter to be listed thereafter-ensuring expeditious progress.

Relevant provisions (extracts & implications)

• Section 107, CGST Act (Appeal to Appellate Authority): Allows an aggrieved person to appeal within three months to the first appellate forum. In refund contexts, the department may appeal against sanction, or the taxpayer may appeal against rejection or reversal.

• Section 112, CGST Act (Appeal to Appellate Tribunal): Enables a further appeal against orders under Sections 107/108 within three months, or from the date to be notified for Tribunal filings, whichever is later. This “notified date” clause is pivotal. It prevents limitation from extinguishing the appellate right when the Tribunal isn’t yet operational, but it does not by itself stop recovery moves-hence the need for judicial interim protection.

What this signals for refund litigation

Refunds often involve granular factual matrices: input chains, place-of-business verification, matching of invoices, shipping/banking proofs, and-critically-speaking orders explaining the decision. When an already-sanctioned refund is reversed, courts look closely at the quality of reasoning and procedural fairness: Was there a proper hearing? Were alleged deficiencies clearly put to the taxpayer? Are the findings evidence-based?

In parallel, the institutional gap-an inoperative GSTAT-creates a systemic concern. The Delhi HC’s order reiterates a pragmatic equilibrium: maintain status quo on recovery until the statutory appellate infrastructure becomes available, ensuring the taxpayer is not compelled to pay first and appeal later to a forum that does not exist.

Conclusion

The Delhi High Court’s interim order in IKIRAON Technologies captures a simple but powerful principle: When the law promises a forum, the absence of that forum should not amplify the taxpayer’s peril. By freezing coercive recovery till GSTAT is functional, the Court safeguards both statutory architecture and procedural fairness. For taxpayers, the message is to move quickly, preserve a robust evidentiary trail, and be ready to prosecute the Tribunal appeal the moment it opens. For the administration, the order is a reminder that process and proportionality matter-especially when appellate bridges are still being built.

Bottom line: No Tribunal, no coercion. Until GSTAT swings its doors open, High Courts are likely to remain the crucial checkpoint protecting taxpayers from recovery actions that would otherwise pre-empt their right to a full statutory appeal.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.