Refund allowed by Appellate Authority cannot be ignored on ground that Revenue decided to challenge such Order

The Hon'ble Delhi High Court in G.S. Industries v. Commissioner Central Goods and Services Tax [W.P.(C) NO. 14719 of 2022 dated March 28, 2023] held that the Order of Appellate Authority allowing refund to assessee cannot be ignored solely because Revenue decided to challenge the order allowing refund, directed the Revenue to disburse refund along with interest and clarified that Revenue is not precluded from availing any remedy and in case Revenue succeeds they would be entitled to recovery the amount disbursed.

Facts

M/s. G.S. Industries ("the Petitioner") is engaged in manufacturing of handpump parts, which is chargeable to GST @ 5%. The Petitioner claims that it has accumulated Input Tax Credit ("ITC") on account of an inverted duty structure.
The Petitioner filed a refund application on July 4,2019 claiming ITC refund of INR 23,10,333/- for the period September 2017 to March, 2018, further, the Petitioner on July 9, 2019 filed another refund application claiming ITC of INR 14,46,417/- for the period April, 2018 to March, 2019 as accumulated ITC. 

The refund applications filed by the Petitioner were duly acknowledged by the Revenue Department ("the Respondent"). However, thereafter two separate deficiency memos both dated November 29, 2019 were issued, pointing certain deficiencies and seeking certain clarifications. 

In addition, the Respondent asked the Petitioner to submit a Chartered Accountant's certificate confirming that the incidence of tax and interest was not passed on to any other person.

The Petitioner responded to the said deficiency memos vide communication dated January 27, 2020 but the Respondent did not accept the Petitioner's explanation and issued a Show Cause Notice dated November 23, 2020 ("the SCN") ordering to submitdetails of raw material used in manufacturing hand pumps, purchase register, stock register and details of registered place of business.

The Petitioner provided the explanation, but the same were not accepted and 2 separate refund rejection orders dated December 14, 2020 ("the refund rejection orders") were issued.

Aggrieved by the refund rejection orders the Petitioner filed an appeal before the Appellate Authority who vide Order-in-appeal No.209-210/2021-2022 dated January 03, 2022 ("OIA") allowed the appeal by relaying on the documents submitted by the Petitioner. However, the refund has not been disbursed.

The Petitioner filed writ before the High Court for non-disbursal of refund even after the Petitioner succeeded in its appeal.

The Respondent submitted before the High Court that they have challenged the OIA before the Commissioner who have passed an order dated May 19, 2022, setting out the grounds on which the appeal is required to be preferred against the OIA.

Issue:

Whether the benefit of OIA can be denied to the Petitioner and the refund amount be withheld solely on the ground that the Respondent has decided to file an appeal against the OIA?

Held

The Hon'ble Delhi High Court in W.P.(C) NO. 14719 of 2022 held as under:

• Observed that, the Respondent has not filed any appeal against the OIA and there is no order of any Court or Tribunal staying the OIA.
• Further observed that, the issue is covered by the earlier decision of Delhi High Court in Mr. Brij Mohan Mangla v. UOI [W.P.(C) 14234/2022 dated February 23, 2023].
• Held that, OIA cannot be ignored by the Respondent solely because according to them, the OIA is erroneous and is required to be set aside and directed the Respondent to process the Petitioner's refund claim along with interest. 
• Stated that, the Respondent would not be precluded from availing any remedy against the OIA and in case the Respondent prevail in their challenge to OIA, the Respondents would be entitled to take consequential action for recovery of any amount that has been disbursed in accordance with the law.