Excess CGST Recovery Beyond 10% Pre-deposit Must Be Refunded With Interest Under Finance Act Provisions

The HC disposed of a writ petition challenging CGST Authority's inaction on a refund claim. Petitioners argued they were entitled to refund of amounts recovered beyond the mandatory 10% pre-deposit required for filing an appeal. Despite respondents' contention that petitioners should approach the Tribunal, the court ruled the recovery exceeding 10% of the reduced demand was legally unsustainable under the Finance Act and relevant provisions. The HC directed respondents to refund the excess amount within four weeks with statutory interest.

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Issues:
Petitioners' claim of refund inaction by CGST Authority, entitlement to refund, legality of recovery beyond 10% of demand, applicability of relevant statutory provisions and High Court decisions.

Analysis:
The petitioners filed a writ petition challenging the inaction of the respondents, Commissioner of Central Tax, Haldia, CGST, in considering their refund claim. The petitioners contended that they are entitled to a refund as they have already filed an appeal before the Appellate Authority by making a mandatory pre-deposit of 10% of the demand arising from the original adjudication order. The petitioners argued that any recovery beyond this 10% pre-deposit is not legally sustainable under the relevant statutory provisions of the CGST Act. They also relied on three decisions from different High Courts to support their contention.

The learned Advocate for the respondents, CGST Authority, opposed the writ petition, arguing that for a refund of the excess amount beyond 10% of the demand, the petitioners should approach the Tribunal where the appeal is pending. The respondents contended that the decisions cited by the petitioners are distinguishable and not applicable to the present case. It was mentioned that the Commissioner had reduced the demand arising from the original order, but the respondent authority had still recovered an amount exceeding 10% of the reduced demand, which was deemed legally unsustainable under the Finance Act, 1994, read with Section 35F of the Central Excises and Salt Act, 1944, and Circular No. 1053/2/2017-CX.

After considering the submissions of both parties, the High Court disposed of the writ petition by directing the respondents to refund the excess amount recovered from the petitioners beyond 10% of the demand arising after the merger with the order of the Commissioner of Appeals. The respondents were instructed to refund the money within four weeks from the date of the order, along with statutory interest.

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