The Allahabad High Court addressed a case involving M/s DCM Shriram Industries Ltd., which sought a refund of ₹5 crore for the financial year 2017–18 under the Uttar Pradesh Value Added Tax (UPVAT) on the purchase of Extra Neutral Alcohol (ENA). This issue had been previously settled in the case of Jain Distillery Pvt. Ltd. v. State of U.P. (2021), where the levy on ENA was deemed ultra vires following the implementation of GST. While an assessment order from October 2022 had approved the refund, the authorities withheld it due to a pending Special Leave Petition (SLP) in the Supreme Court concerning the Jain Distillery case. Despite the SLP, no stay had been granted, leading to a rejection of the refund in July 2025, which was subsequently challenged.
The central issue was whether the refund could be withheld solely because of the pending SLP, without a stay on the High Court's previous judgment.
Read More: GST - Orissa High Court: Rectification of GST returns permitted where tax credited to wrong GSTIN of the same recipient; Portal limitations cannot bar correction
The court ruled that the mere pendency of an SLP does not negate the High Court's judgment, and without a stay, the refund should proceed. The court emphasized that Article 265 of the Constitution prohibits the retention of tax without legal authority. Consequently, the court ordered the release of the refund to the petitioner within eight weeks, subject to an indemnity bond and checks against unjust enrichment under the UPVAT Act. However, the claim for interest on the refund was deferred pending the final outcome of the SLP. The department's order rejecting the refund was quashed.
Order date: 25 Sept 2025
Parties: M/s DCM Shriram Industries Ltd. v. State of U.P. & Anr.
Facts -
- The Petitioner claimed refund of ₹5 crore for FY 2017–18 under UPVAT on purchase of Extra Neutral Alcohol (ENA). The Issue of taxability of ENA was already settled in Jain Distillery Pvt. Ltd. v. State of U.P. (2021), where levy was held ultra vires post-GST.
- Assessment order dated 01.10.2022 allowed refund, but authorities withheld it citing pendency of SLP in Jain Distillery. Supreme Court had issued notice but no stay was granted. Refund rejection order dated 19.07.2025 was challenged.
Issue -
- Whether refund of VAT on ENA can be withheld merely due to pendency of an SLP in the Supreme Court, without a stay on the High Court’s earlier judgment?
Order -
- The court held that mere pendency of SLP does not suspend operation of High Court’s judgment; in absence of stay, refund directions must be implemented.
- Article 265 prohibits retention of tax without authority of law. Refund directed to be released to the buyer (Petitioner No. 2) within 8 weeks, subject to indemnity bond and unjust enrichment check under Section 43 UPVAT Act.
- Claim for interest on refund deferred until final outcome of pending SLP in Jain Distillery. Department’s order dated 19.07.2025 rejecting refund was quashed.
