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.