2025 (1) TMI 52 - HC - GST

Rejection of refund claim - Failure of respondents to file a reply despite granted extensions - HELD THAT - The petitioner is stated to have applied for refund for the period April 2018 to March 2019 in terms of two applications dated 04 July 2019 and 09 July 2019. Two deficiency memos came to be issued by the respondents while considering the aforesaid applications. It is the case of the writ petitioner that the aforesaid deficiency memos were duly attended to and all material duly supplied. Since the refund was not released even thereafter, the petitioner is stated to have approached the respondents by way of representations dated 13 February 2020 and 27 February 2020. In light of the continued inaction of the respondents, the petitioner had approached this Court in G.S. INDUSTRIES VERSUS PRINCIPAL COMMISSIONER OF CENTRAL GOODS SERVICES TAX ORS. 2020 (11) TMI 1126 - DELHI HIGH COURT and which came to be disposed of on 24 November 2020, with the direction that the claim of the petitioner be duly processed and a decision taken thereon within a period of three weeks. Whether it would have been permissible at all for the Commissioner to question the validity of the order dated 09 June 2023 in purported exercise of powers conferred under Section 107 (2) of the Act? - HELD THAT - The Commissioner, while seeking to review an order passed under the Act and in purported exercise of powers vested by Section 107 (2), cannot possibly sit over and above an order passed by the appellate authority - It clearly does not contemplate the Commissioner seeking to even attempt to review an order passed by the appellate authority. The power so wielded by the Commissioner with reference to Section 107 (2) is rendered further unsustainable when viewed in light of the observations which appear in our earlier order of 28 March 2024 - the impugned order cannot possibly sustain. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the respondents' failure to file a reply justifies the court's decision to proceed with the writ petition.
Whether the appellate authority's decision to set aside the refund order dated 09 June 2023 was justified.
Whether the Commissioner was correct in reviewing the refund order under Section 107(2) of the Central Goods and Services Tax Act, 2017.
Whether the denial of statutory interest on the refund amount was valid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Respondents' Failure to File a Reply

Legal Framework: The court considered procedural fairness and the necessity of timely responses in legal proceedings.
Court's Interpretation: The court found no justification to defer the writ petition due to the respondents' failure to file a reply despite multiple opportunities.
Conclusion: The court proceeded with the writ petition, emphasizing the need for timely compliance by the respondents.

Issue 2: Appellate Authority's Decision to Set Aside the Refund Order

Legal Framework: The appellate authority reviewed the refund order under the provisions of the CGST Act and relevant circulars.
Court's Interpretation: The appellate authority considered the absence of Annexure-B and other procedural deficiencies as grounds to set aside the refund order.
Key Evidence: The appellate authority noted the lack of mandatory documents, such as Annexure-B, which were required by Circular No. 125/44/2019-GST.
Application of Law: The court found the appellate authority's decision to be unsustainable, as the refund order was meant to give effect to a prior appellate decision.
Conclusion: The court quashed the appellate authority's decision to set aside the refund order.

Issue 3: Commissioner's Review under Section 107(2)

Legal Framework: Section 107(2) of the CGST Act allows the Commissioner to review orders passed by adjudicating authorities.
Court's Interpretation: The court held that the Commissioner could not review an order that was already upheld by an appellate authority.
Conclusion: The court deemed the Commissioner's review unsustainable and quashed the order.

Issue 4: Denial of Statutory Interest

Legal Framework: The CGST Act provisions regarding interest on delayed refunds.
Court's Interpretation: The court did not address this issue in detail, as it was subject to separate proceedings.
Conclusion: The issue of interest was left open for determination in separate proceedings.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The power so wielded by the Commissioner with reference to Section 107 (2) is rendered further unsustainable when viewed in light of the observations which appear in our earlier order of 28 March 2024."

Core principles established:

The appellate authority's decisions must be respected unless properly challenged through an appeal.
The Commissioner cannot review an appellate authority's order under Section 107(2) of the CGST Act.

Final determinations on each issue:

The court proceeded with the writ petition despite the respondents' failure to file a reply.
The appellate authority's decision to set aside the refund order was quashed.
The Commissioner's review of the refund order was deemed unsustainable.
The issue of statutory interest was left open for separate proceedings.

The judgment underscores the importance of adhering to procedural requirements and respecting appellate decisions unless duly challenged. The court's decision reflects a commitment to ensuring procedural fairness and the proper application of statutory provisions.

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