In a significant relief for taxpayers, the Hon’ble High Court of Delhi has held that a GST refund cannot be denied by the revenue authorities by simply disregarding a binding High Court ruling, particularly where no appeal has been filed and no stay is in operation. The judgment strengthens the position of assessees that have deposited tax during litigation without admitting liability and later seek refund once the legal issue stands settled.
The ruling was delivered in the matter of Thales India Private Limited vs Assistant Commissioner, CGST, Delhi dated 27 May 2025. The case assumes importance in the wider controversy around GST on secondment of employees, especially where salary costs are reimbursed by an Indian entity to an overseas group company without issuance of any invoice.
The dispute originated when Thales India Private Limited challenged a show cause notice issued by the department seeking to levy GST on salary cost reimbursement made to its foreign group entity in relation to seconded employees. The petitioner’s case was that such arrangement did not give rise to a taxable supply in the manner alleged by the department.
In the earlier proceedings, the Delhi High Court had already examined the issue in light of CBIC Circular No. 210/4/2024-GST and the Court’s own ruling in the case of Metal One Corporation. The Court noted that where no invoice is raised by the foreign affiliate on the domestic entity, the value of such services is to be treated as Nil for the purposes of valuation under Rule 28. On that basis, the tax exposure itself became unsustainable in the facts of the case.
The present ruling is closely linked to the Delhi High Court’s earlier view in Metal One Corporation, which had already provided relief on the question of GST liability on secondment of employees. In both matters, the absence of an invoice played a central role. Once it was accepted that no invoice had been issued, the deemed value under the applicable rule had to be treated as Nil, leaving no plausible tax liability under that provision.
This aspect is especially relevant for businesses evaluating cross-border employee deployment structures, since the taxability of secondment arrangements often turns on documentation, contractual design, and the actual employer-employee relationship. Businesses dealing with similar exposure may also review their broader GST advisory and compliance framework to assess how such positions are being supported in practice.
After obtaining relief on the underlying tax issue, the petitioner filed a refund application for INR 8.99 crore, being the amount deposited earlier without admitting liability and only to avoid further dispute. However, the refund was rejected by the department.
The department argued, among other things, that the ruling in Metal One Corporation had not yet been accepted by the competent authority and that there was no actual employer-employee relationship in the secondment arrangement. This effectively meant that the revenue attempted to deny refund despite the fact that the legal position had already been decided in favour of the assessee and had not been challenged further.
The Delhi High Court did not accept the department’s stand. It held that where the petitioner’s own case, as well as the ruling in Metal One Corporation, had not been challenged by the Department of Revenue, the legal position had attained finality. In such circumstances, the refund claim could not be rejected on the basis that the department had not internally accepted the earlier judgment.
Accordingly, the Court directed the authorities to process the refund claim under Section 54 of the CGST Act and the Delhi GST Act and to credit the amount to the petitioner within two months. The ruling reinforces the principle that the revenue cannot continue to retain tax once the levy itself is no longer sustainable in law.
This judgment is important beyond the facts of Thales India. First, it strengthens the taxpayer position in disputes concerning GST on secondment of employees, particularly where no invoice is raised and the valuation mechanism under Rule 28 becomes relevant. Second, it confirms that once a High Court ruling has attained finality, refund relief cannot be frustrated by administrative reluctance or internal non-acceptance.
For businesses that have deposited GST during investigation, adjudication, or ongoing litigation, this decision also highlights the need for a clear strategy around GST refund claims and documentation of payments made under protest. In cases involving active controversy or recovery exposure, a parallel review of indirect tax litigation strategy may also be necessary. From a broader policy and dispute-management perspective, this ruling sits squarely within the evolving landscape of indirect tax jurisprudence in India.
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