Refund can’t be Withheld Based on Commissioner’s Appeal, Refund with Interest to be Processed: HC

Case Details: G. S. Industries v. Commissioner Central Goods and Services Tax - [2023] 151 taxmann.com 162 (Delhi)

Judiciary and Counsel Details

• • Vibhu Bakhru & Amit Mahajan, Jj.
  • Vineet Bhatia & Siddarth Malhotra, Advs. for the Petitioner.
  • Ms Anushree Narain, Standing Counsel for the Respondent.

Facts of the Case

In this case, the petitioner is engaged in the manufacturing of Handpump parts and applied for a refund of accumulated Input Tax Credit under the inverted duty structure. The Department initially acknowledged the petitioner’s refund applications but later issued deficiency memos and sought clarifications.

The Department also asked for a Chartered Accountant’s certificate confirming that the tax and interest were not passed on to others. The petitioner responded to the deficiencies, but the Department issued show cause notices calling for reasons why the refund applications should not be rejected. The petitioner responded to these notices, but the Department rejected the refund applications in a separate order.

The petitioner then filed an appeal against the rejection order, and the Appellate Authority allowed the appeals in a common order. Despite the favorable order at the Appellate Authority level, the refund has not been disbursed to the petitioner. The Department informed that they have decided to challenge the order-in-appeal and have passed an order setting out the grounds for the appeal.

The court examined whether the benefit of the order-in-appeal can be denied to the petitioner and the refund can be withheld solely because the respondent decided to file an appeal. It was noted that no appeal was filed by the respondent, and there was no court order staying the order-in-appeal. The court concluded that the order-in-appeal cannot be ignored solely because the revenue considers it erroneous.

High Court Held

The High Court directed the respondents to process the petitioner’s claim for a refund along with the interest. However, it was clarified that the respondents can pursue remedies against the order-in-appeal, and if they succeed in their challenge, they can take action to recover any disbursed amount in accordance with the law.