Refund remand limited by merger; time-barred Revenue appeal fails, IGST refund with interest ordered, interest adjustment upheld

HC held the Revenue's appeal against the original refund order as time-barred and rejected the contention that limitation ran from a later order; the doctrine of merger applied, and the original order stood merged with the appellate order, confining remand to a limited issue. The Revenue's subsequent appeal on issues already determined was therefore not maintainable. HC upheld the legality of adjusting the adjudicated interest liability against the sanctioned IGST refund, holding that natural justice requirements were met and interest was a statutory consequence of delayed payment. The direction denying refund in entirety was set aside, and the sanctioned refund was ordered to be disbursed with applicable interest, while the challenge to interest adjustment was rejected.

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Issues Involved:

1. Whether the Revenue's appeal against the Order dated 24.10.2018 was barred by limitation.
2. Whether the Order-in-Original dated 24.10.2018 merges with the Appellate Order.
3. Whether adjustment of interest liability is permissible.
4. Whether the petitioner is liable to pay interest as determined by the Adjudicating Authority.
5. Denial of refund in entirety on account of amendment in return/invoices.

Summary:

1. Limitation of Revenue's Appeal:
The court examined whether the Revenue's appeal against the Order-in-Original dated 24.10.2018 was filed within the prescribed time limit. The court found the Revenue's explanation for the delayed communication of the order unconvincing and noted that intra-departmental delays cannot extend the limitation period. The appeal was deemed beyond the prescribed period of limitation as the statutory framework requires strict adherence to the time frame for filing appeals.

2. Merger of Orders:
The court held that the Order-in-Original dated 24.10.2018 merged with the Appellate Order dated 30.04.2019. The Appellate Authority had upheld the admissibility of the petitioner's claim for refund of IGST and the adjustment of interest on delayed payment. The remand to the Adjudicating Authority was for a limited purpose, and the Revenue's appeal on this matter was not maintainable.

3. Adjustment of Interest Liability:
The court found that the adjustment of interest liability from the refund amount was permissible. It stated that as per Section 75(12) of the CGST Act, interest on self-assessed tax is recoverable without the need for a notice under Section 73. The petitioner was given full opportunity to contest the interest claim, satisfying the principles of natural justice.

4. Liability to Pay Interest:
The court rejected the petitioner's contention that it was not liable to pay interest on delayed payments of IGST on inputs under RCM, stating that the statutory levy of interest cannot be avoided even if the transaction is revenue neutral. The petitioner was liable to pay interest on delayed payment of IGST on exports as well, as it had amended its returns to reflect exports made after payment of IGST.

5. Denial of Refund on Amendment of Returns:
The court noted that the petitioner's claim for refund had been accepted by the Adjudicating Authority and affirmed by the Appellate Authority. The Revenue's contention that the petitioner could not amend its returns to reflect exports on payment of IGST was not persuasive. The petitioner was entitled to a refund of the IGST paid, and any denial of refund on the basis of amended returns was impermissible.

Conclusion:
The court directed that the refund sanctioned by the Adjudicating Authority be disbursed to the petitioner along with applicable interest. The adjustment of interest amounting to Rs. 5,08,03,767/- was upheld as legal. The impugned Order-in-Appeal dated 14.10.2020, to the extent it denies the petitioner's claim for refund in entirety, was set aside. The petition was disposed of accordingly.

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