Refund order cannot be stayed without any finding of erroneous or prejudicial to Revenue

The Hon’ble Supreme Court in Union Of India & Ors. Versus M/s. HCC VCCL Joint Venture - 2025 (7) TMI 792 - SC Order dismissed the SLP against Delhi High Court’s ruling that revisionary powers under Section 108 of the CGST Act cannot be exercised to stay refund orders, absent a finding of error or impropriety.

Facts:

HCC VCCL Joint Venture (“the Petitioner”) was sanctioned refund of approximately ₹5.5 lakhs from the Electronic Cash Ledger. Subsequently, the Revisional Authority passed an order putting the refund in abeyance without rendering any finding that the refund order was erroneous or prejudicial to revenue.

The Petitioner challenged this action before the Delhi High Court, contending that the Revisional Authority had not formed the requisite opinion or rendered any conclusion as required under Section 108 of the CGST Act, 2017.

The Revenue (“the Respondents”) defended the action stating that Section 108 permits the Commissioner to intervene in cases where material facts, whether available at the time or not, were not considered while issuing the refund order. The Revenue also contended that both electronic credit and cash ledger balances constitute tax and that provisional restraint on refund applies equally to both.

Issues:

• Whether the Revisional Authority under Section 108 of the CGST Act can stay a refund order without forming an opinion or recording reasons that the refund order was erroneous or prejudicial to revenue?
• Whether doubts or allegations regarding wrongful availment of ITC are sufficient to invoke revisionary powers under Section 108 against an already sanctioned refund from the Electronic Cash Ledger?

Held:

The Hon’ble Supreme Court in Union Of India & Ors. Versus M/s. HCC VCCL Joint Venture - 2025 (7) TMI 792 - SC Order, held as under:

• Observed that there was no need to interfere with the judgment of the Delhi High Court under Article 136 of the Constitution of India.
• Held that the Special Leave Petition is dismissed, but kept the question of law open for future determination.

The Hon’ble Delhi High Court, (against which the SLP was filed), held as under:

• Observed that, under Section 108 of the CGST Act, a precondition for invoking revisionary power is the formation of an opinion that the original order was erroneous, illegal, or improper.
• Noted that, in the present case, no such finding or opinion was recorded by the Revisional Authority. The mere receipt of post-facto intelligence alleging wrongful availment of ITC does not relate to or invalidate the refund order.
• Held that, the allegation of wrongful ITC availment is distinct and has no correlation with the validity of the refund order.
• Further held that, both Electronic Credit Ledger and Electronic Cash Ledger balances are considered “tax” under GST, but that does not affect the requirement of forming a valid opinion under Section 108.

Our Comments:

This judgment limits the jurisdiction under Section 108 of the CGST Act. The Delhi High Court ruling draws a clear distinction between allegations of wrongful ITC availment and the propriety of a refund order issued from the Electronic Cash Ledger. Also powers under Section 108 must be predicated on the formation of an independent opinion by the Revisional Authority regarding the refund order’s legal validity. The absence of such a finding renders the invocation of Section 108 ultra vires. The Supreme Court’s refusal to interfere protects the procedural safeguard.

Relevant Provisions:

Section 108 – Power of revision by the Revisional Authority (CGST Act, 2017)

“The Revisional Authority may, on its own motion, or upon information received by it, or on request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceeding, and if he considers that any decision or order passed under this Act by any officer subordinate to him is erroneous in so far as it is prejudicial to the interest of revenue and is illegal or improper or has not taken into account certain material facts, whether available or not at the time of issuance of the said order, he may, if necessary, stay the operation of such decision or order…”

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