The Supreme Court of India ruled that when the burden of a tax has been passed on to consumers, any refund must be credited to the Consumer Welfare Fund as per Section 54 of the CGST Act. This decision came in the case of Union of India vs. Torrent Power Ltd., where the Union challenged a Gujarat High Court order that directed a refund of ₹19.28 crore to Torrent Power Ltd. after a GST notification was declared unconstitutional in the Mohit Minerals case.
Torrent Power Ltd., a power distributor, had collected IGST from consumers under the now-invalid notification and sought a refund after the levy was struck down. Although the company acknowledged that the tax burden had been passed on to consumers, it proposed depositing the refund in a separate account to adjust through future tariff reductions. The Gujarat High Court accepted this proposal to ensure consumers benefited from the refund.
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The issue before the Supreme Court was whether a refund of GST, where the tax incidence was passed on to consumers, could be disbursed through a court-devised mechanism rather than being credited to the Consumer Welfare Fund. The Supreme Court concluded that Section 54(5) requires refundable amounts to be credited to the Consumer Welfare Fund, unless exceptions under Section 54(8) apply, which was not the case here. The Court held that the High Court’s alternative refund mechanism was not legally permissible under the CGST Act. Consequently, the Supreme Court set aside the High Court's order and directed Torrent Power Ltd. to transfer the ₹19.28 crore to the Consumer Welfare Fund within three months.
Order Date - 10 February 2026
Parties: Union of India Vs Torrent Power Ltd
Facts -
- Union of India challenged a Gujarat High Court order directing refund of ₹19.28 crore to Torrent Power Ltd., after a GST notification was declared unconstitutional in the Mohit Minerals case.
- Torrent Power Ltd., a power distributor, had collected IGST from consumers under the invalid notification and later sought refund after the levy was struck down.
- It admitted that the tax burden had been passed on to consumers but proposed to deposit the refund in a separate account and adjust it through future tariff reduction.
- The High Court accepted this proposal, aiming to ensure consumers ultimately benefited from the refund.
Issue -
- Whether a refund of GST, where tax incidence was passed on to consumers, can be disbursed through a court-devised mechanism instead of being credited to the Consumer Welfare Fund under Section 54?
Order -
- The Supreme Court held that Section 54(5) mandates credit of refundable amounts to the Consumer Welfare Fund unless exceptions under Section 54(8) apply.
- Since the tax burden was admittedly passed on, the exception allowing refund to the applicant did not apply.
- The High Court’s alternative refund mechanism was not contemplated under the CGST Act and was legally impermissible.
- The Court set aside the High Court order and directed Torrent Power Ltd. to transfer ₹19.28 crore to the Consumer Welfare Fund within three months.
