The Allahabad High Court has directed the State GST department to pay a refund of ₹1,10,72,753 in cash to a company that had permanently closed its business, instead of re-crediting it to the electronic credit ledger as ITC. A credit in a ledger that can no longer be used gives no real benefit, and the Act does not prohibit a cash refund in such a case.
Case at a glance
| Case | M/s Vossloh Cogifer Turnouts India Pvt. Ltd. v. State of U.P. & Another |
| Forum | Allahabad High Court, Lucknow (Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary) |
| Case No. | Writ Tax No. 1014 of 2026 |
| Total refund | ₹1,38,91,287, of which ₹1,10,72,753 was re-credited as ITC |
| Key provisions | Sections 54 and 56 UPGST/CGST Act |
| Result | Cash refund with applicable interest within eight weeks |
Facts of the case
The company had permanently discontinued its operations and surrendered its GST registration. On its refund application dated 25.07.2025, an order dated 06.05.2026 sanctioned ₹1,38,91,287, but paid only part in cash and re-credited ₹1,10,72,753 to the electronic credit ledger.
Since the business was closed, the ledger was no longer functional and the credit could never be used. The company challenged the re-credit and also sought interest.
Issue before the High Court
Can the department re-credit a refund to the electronic credit ledger when the taxpayer has closed its business and cannot use that credit?
What the High Court held
- There is no prohibition in the Act against paying the amount in cash.
- As the business no longer exists and the electronic credit ledger has ceased to function, the re-credit amount must be paid in cash.
- The department was directed to refund ₹1,10,72,753 in cash, with applicable interest, if any, in accordance with the Act, within eight weeks.
Practical takeaways for taxpayers
- When closing a business, plan for unutilised ITC and pending refunds before surrendering registration.
- If a refund is re-credited to a ledger you cannot use, seek a cash refund in writing and, if refused, approach the High Court.
- Claim interest under section 56 on delayed refunds in the same proceedings.
Frequently asked questions
Can a GST refund be paid in cash instead of ITC re-credit?
Where the business has closed and the credit ledger is unusable, the Allahabad High Court directed payment in cash.
Does this apply to every refund?
No. The ruling turns on the fact that the business had closed and the credit could not be used.
Facing a similar GST dispute?
GST Folio prepares replies to show cause notices, appeals before the Appellate Authority and GSTAT, refund claims and ITC reconciliations for businesses across India. Call or WhatsApp +91 80513 31315 or email gstfolio@zohomail.in.
This summary is based on the order of the Allahabad High Court (Lucknow Bench) in Writ Tax No. 1014 of 2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.