The Uttarakhand High Court ruled that the Goods and Services Tax (GST) collected on the sale of rejected wheat and paddy seeds, which were not sold in branded unit containers, cannot be retained by the department once it is acknowledged that no GST was payable. The case involved M/s Rungta and Sons, who purchased these seeds from Uttarakhand Seeds and Tarai Development Corporation Ltd. in 2017, with ₹10,23,075/- deducted as GST from their security deposit.
M/s Rungta and Sons argued that, according to a prior advance ruling in the case of M/s Sam Overseas, such sales were not liable for GST if the seeds were sold without a registered brand name or unit container. Although the Corporation admitted the GST amount was refundable, they had not received the refund from the State Tax Department despite submitting applications.
The main issue was whether the GST department could retain the GST collected when it was undisputed that the transaction was not liable to GST. The Court noted that the Corporation had accepted the refund liability but had not received the amount from the department. The revenue department contended that the advance ruling was binding only on the applicant and the jurisdictional officer in that case. However, the Court found no explanation for the delay in processing the refund applications.
Read More: Himachal Pradesh High Court: Once either Central or State GST authority initiates adjudicatory proceedings on a dispute, parallel proceedings by the other authority are barred; Diected both Central and State GST authorities to communicate with each other and resolve [Order attached]
The High Court concluded that retaining the tax without authority was unjustified and directed the Corporation to file the refund application in Form RFD-01 within two weeks. The department was ordered to process the refund immediately, with the Corporation required to pass on the refunded amount to the petitioner within two weeks of receipt.
Order Date - 07 May 2026
Parties: M/s Rungta and Sons Vs Union of India and Others
Facts -
- Petitioner, M/s Rungta and Sons, purchased rejected wheat and paddy seeds from Uttarakhand Seeds and Tarai Development Corporation Ltd. in 2017, and GST of ₹10,23,075/- was deducted from its security deposit.
- The petitioner argued that as per the advance ruling in the case of M/s Sam Overseas, rejected seeds sold without any registered brand name or unit container were not liable to GST.
- When refund was not granted, the petitioner earlier approached the High Court in WPMS No.1272 of 2020, after which the Corporation was directed to decide its representation.
- The Corporation later admitted that the GST amount was refundable, but stated that refund had not been received from the State Tax Department despite applications filed before the authorities.
Issue -
- Whether the GST department could continue to retain GST collected on rejected wheat and paddy seeds when it was undisputed that such transaction was not liable to GST?
Order -
- The Court noted that the Corporation itself had accepted that the GST deducted from the petitioner was liable to be refunded. The only reason for non-payment was that the Corporation had not yet received refund from the department.
- The revenue department argued that the advance ruling relied upon by the petitioner was binding only on the applicant in that case and the jurisdictional officer. However, the Court observed that the department failed to explain why the refund applications already submitted by the Corporation were not processed.
- The High Court clearly held that since the basic fact that GST was not payable on the transaction was not disputed, the department could not be permitted to retain the amount any further. The Court emphasized that retention of tax without authority was unjustified.
- The Court directed the Corporation to file the refund application in Form RFD-01 within two weeks. It further ordered the department to process the refund immediately and directed the Corporation to pass on the refunded amount to the petitioner within two weeks of receipt.
