Civil Court decreed refund of FD given as security deposit for registration in VAT era

Civil Court decreed refund of security deposit of VAT era as in GST Regime there is no requirement of security deposit at the time of registration.

In a recent judgment, Civil Court Judge decreed refund of security deposit in the form of Fixed Deposit given at the time of registration in VAT (pre-gst era) as in GST Regime there is no requirement of submission of a fixed deposit as security for registration.

ABCAUS Case Law Citation:
4986 (2026) (01) abcaus.in CC

In the instant case, the plaintiff/assessee was running his business in Proprietorship firm which was registered in the Department of Value Added Tax in pre-GST period.

In pursuance to the registration rules and prerequisites of VAT law, the plaintiff had submitted a fixed deposit of Rs. 50,000/- as mandated security for Value Added Tax registration under the Department of State Trade and Taxes.

The plaintiff had consistently submitted all VAT returns punctually, without any default and had no outstanding dues or costs. consequent to the enactment of the Goods and Services Act, 2017 (GST Act), the plaintiff transitioned to the new taxation framework, i.e. Good and Services Tax (GST). The plaintiff continued conducting business in accordance to GST Act and filing the requisite return.

Since, under the GST regime there is no requirement of submission of a fixed deposit as security for registration, the plaintiff filed an application for release of fixed deposit (FD) through a letter. However, no action was taken by the defendant Department for release of the FD.

It was submitted that when the authorized representative of the plaintiff visited the GST officer and was informed that the application for release of the FD was misplaced and the AR of submitted a new application/request letter for release of the FD.

However, the defendant GST Department failed to take measures for release of the plaintiff’s FD. The plaintiff served an intimation letter through his advocate and again requested, the concerned officer to release the FD. However, no steps were taken for release of the FD.

When the plaintiff through its Authorized Representative inquired about the status of his application, upon which the concerned GST Officer refused to released the FD by saying that “mein isi kaam ke liye nahi betha yaha, jab time hoga to kar dunga”.

Aggrieved by the callous approach of the GST Officer, the Plaintiff instituted a civil suit praying for a decree of mandatory injunction directing the GST Department to release the Fixed Deposit.

Despite service of summons, the defendant Department did not appear and therefore, the case was proceeded ex-parte.

The Hon’ble Civil Judge observed that plaintiff had proved that he was registered previously in the VAT and now GST. The plaintiff also proved that the FD was submitted in compliance of Value Added Tax Rules and there appeared to be no requirement of submitting Security for registration in GST.

Further the Civil Judge observed that the bar of Section 162, GST Act also did not apply as the present suit was not against any question arising from or relating to anything done or purporting to be done under GST Act.

The Civil Judge observed that it was for the defendant Department to prove that the plaintiff was not entitled to release of FD or that the plaintiff did not complete the procedural requirements for release of FD. However, the defendant had failed to do so. Despite service of summons, the defendant did not appear and contest the matter and therefore, was proceeded exparte. Since the defendant was proceeded exparte and no evidence was led by the defendant, there was nothing on record which casted any doubt on the testimony of Prosecution witness/Plaintiff himself. The testimony of the PW had gone unchallenged, uncontroverted, and unrebutted.

Accordingly, the Civil Judge held that Plaintiff had successfully proved its case on a scale of balance of probabilities. Hence, the plaintiff had duly discharged his burden of proof under Section 104 of the Bharatiya Sakshay Adhiniyam, 2023.

As a result, it was held that the plaintiff was entitled to a decree of mandatory injunction directing the defendant GST Department to release of the Fixed Deposit to the plaintiff.

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