THE DEPARTMENT CANNOT WITHHOLD REFUND AS DIRECTED BY THE APPELLATE AUTHORITY ON PLEA OF FILING APPEAL

[Mr. M. GOVINDARAJAN]

In MR. BRIJ MOHAN MANGLA VERSUS UNION OF INDIA & ORS. - 2023 (3) TMI 327 - DELHI HIGH COURT  the petitioner is engaging in the manufacture of various types of liquid printing inks.  The petitioner, from the period May 2019 to December 2019 the petitioner was carrying on business in the premises at A-80 Block, near Kasturi Ram Public School, DSIDC Industrial Area, Delhi - 40 and after that carries the business under the trade name Standard Ink in the premises at Killa No. 4/24, Village Nathpur, Sonipat, Haryana.

The petitioner claimed the refund of input tax credit accumulated to the extent of Rs.74,02,337/- for the above said period by filing six applications for refund for the relevant period i.e., from May 2019 to December 2019.  The Department also issued show cause notice on 11.02.2021 to show cause as to why its registration not be cancelled.  The petitioner filed reply to the said show cause notice on 15.02.2021.  However the department cancelled the registration certificate on 19.02.2021.  The petitioner filed an application for revocation of the cancellation before Deputy Commissioner.  The same was also rejected by the Department. 

The said refund applications were not processed by the Department.  Instead the Department issued show cause notices to the petitioner calling upon the petitioner to show cause as to why his claims for refund be not rejected for the following reasons-

• On physical verification of the premises of the petitioner it was found that the concern was nonexistent.
• The GSTIN registration was cancelled with effect from 19.02.2021.

The petitioner gave reply to the show cause notices.  In his reply the petitioner informed that during the relevant period he was carrying on the business from the premises as declared in the registration certificate i.e., A-80 Block, Nearly Kasturi Ram Public School, DSIDC Industrial Area, Narela, Delhi - 40.  However he had subsequently shifted his unit in the current location. 

The Department did not accept the reply filed by the petitioner.  Six separate orders were passed rejecting all the refund claims.  In the rejection order it was mentioned that the petitioner was not a registered person and therefore was not entitled to refund under Section 54(3) of the Act. 

Being aggrieved against the orders of Adjudicating Authority, the petitioner filed appeals before Appellate Authority.   The Appellate Authority allowed the appeals of the petitioner.  The Appellate Authority set aside the orders of the Adjudicating Authority rejecting the refund applications.   The Appellate Authority also directed to restore the petitioner’s GST Registration. 

On the basis of the order of the Appellate Authority the petitioner filed applications for refunds. The petitioner also enclosed therewith a certificate from a Chartered Accountant and an undertaking as required.   But the said applications were also not processed as that of the first time.  Deficiency memos were issued and after that the claim of refunds was rejected. 

Therefore the petitioner filed the present appeal before the High Court.  The Department filed the reply to the appeal contending the following-

• The petitioner’s registration is liable to be cancelled as the petitioner was not found as the petitioner was not found functioning at the given address.
• If the petitioner’s registration is cancelled the petitioner would no longer be a registered person and therefore the petitioner cannot file application for refund under section 54(3) of the Goods and Services Tax Act, 2017.
• The applications for refund filed by the petitioner were not processed for the only reason as stated above.
• The concerned Authority has reviewed the order passed by the Appellate Authority.  The Authority directed that an appeal shall be filed against the order of Appellate Authority directing refunds and restoration of registration certificate. 

The High Court observed that the appeals as pleaded by the Department have not yet been filed.  The High Court further observed that the limitation for filing appeal has also been expired.  The Department for this contended that the appeals could be filed in time as per circular dated 03.12.2019 the time for the department to prefer the appeal has been extended till three months after the date on which the Tribunal is constituted.  In this regard the High Court observed that it is not necessary to examine the question whether the appeals if and when preferred would be within the time.   The Department has not secured any order for the stay of the order of appellate authority.

The High Court held that it is not open to the Department to ignore the orders passed by the Appellate Authority on the ground that the Department has decided to go in for appeal against the order of Appellate Authority.  It would be debilitating to the rule of law, if the Department is permitted to withhold implementation of the orders passed by the authority in this manner. 

The High Court allowed the appeal filed by the petitioner and directed the Department to process the petitioner’s claim for refunds along with interest. 

The High Court also clarified that this order would not precluded the Department from availing the remedy of filing appeal against the order of Appellate Authority in accordance with law.  In the event the Department succeeds in appeal it would be entitled to take consequential action for recovery of any amount refunded in accordance with the applicable law.