2024 (11) TMI 659 - HC - GST

Refund sanction cannot be placed in abeyance under Section 108 without proving original order was illegal or invalid

M/s. HCC VCCL Joint Venture Versus Union Of India & Ors.

The Delhi HC held that the revisional authority's order placing a refund sanction in abeyance under Section 108 of CGST Act, 2017 was invalid. The ... Refund Claims - Allegation of wrongful availment of ITC - Validity of the order placing the refund sanction order in abeyance - Section 108 of the Central Goods & Services Tax Act, 2017 - HELD THAT:- Section 54 prescribes the manner in which a person claiming refund may apply for disbursal of those amounts. Hereto, the Proviso to Section 54 (1) stipulates that a registered person claiming refund of sums standing in balance in the Electronic Cash Ledger would have to follow the procedure as prescribed. Of crucial significance is the usage of the phrase “in accordance with the provisions of sub-section (6) of Section 49” as they appear in Section 54 (1). Undisputedly, there is no outstanding demand against the petitioner and which may have perhaps legitimately constituted one of the possible reasons to withhold the refund. While it is true that Section 54 while making specific provisions with respect to refund of unutilized ITC in terms of sub-sections (5) and (8) thereof, stops short of incorporating similar restrictions on utilization of the balance standing in the Electronic Cash Ledger in terms which may be described as explicit, the position, would be no different. Section 108 empowers the revisional authority to place in abeyance “any order” made under the CGST Act and which in its opinion could be said to be illegal, improper or prejudicial to the interest of the Revenue - the contention of the petitioner cannot be sustained, who had sought to canvass a position of distinction which should be recognised to exist and governing sums which stand in balance in the Electronic Cash and Electronic Credit Ledgers. The revisional authority appears to have doubted the ITC which was claimed by the writ petitioner in the tax period in question. While that conclusion and tentative view as expressed would be open to be tested under the CGST Act, the question which merits consideration is whether that conclusion would have justified the invocation of Section 108. Admittedly, the allegation of wrongful availment of ITC is based on intelligence inputs received subsequent to the passing of the order dated 09 December 2022. The allegation of improper utilization of ITC is one which is clearly distinct and unconnected with the order sanctioning refund. While that allegation, when tested and examined, may ultimately lead to the creation of prospective liabilities, it has no correlation with the question of whether the order sanctioning refund was rendered invalid or was liable to be corrected under Section 108. Absent any finding or conclusion having been rendered by the Commissioner in this respect, and which may have tended to indicate that the opinion expressed in the order dated 09 December 2022 was rendered unsustainable, illegal or invalid, the order impugned cannot be sustained - petition allowed. Issues Involved:1. Validity of the order placing the refund sanction order in abeyance.2. Interpretation of the provisions of Sections 49, 51, and 54 of the CGST Act.3. Applicability of Section 108 of the CGST Act for staying the refund order.4. Alleged wrongful utilization of Input Tax Credit (ITC).Issue 1: Validity of the Order Placing the Refund Sanction Order in AbeyanceThe writ petitioner challenged the order dated 05 July 2023, which placed in abeyance a refund sanction order dated 09 December 2022. The refund order had sanctioned a sum of INR 5,50,00,000/- to the petitioner. The court noted that the refund pertained to amounts in the Electronic Cash Ledger of the petitioner, which were deducted by the Delhi Metro Rail Corporation under Section 51 of the CGST Act. The court observed that there was no quantified demand or liability against the petitioner, and the principal allegation was of incorrect utilization of ITC.Issue 2: Interpretation of the Provisions of Sections 49, 51, and 54 of the CGST ActThe court examined the provisions of Sections 49, 51, and 54 of the CGST Act. Section 49(5) outlines the utilization of Input Tax Credit, while Section 49(6) allows for refund of balances in the Electronic Cash or Credit Ledger in accordance with Section 54. The court highlighted that Section 54 does not incorporate prohibitions against refunding amounts in the Electronic Cash Ledger. The petitioner argued that restrictions under the CGST Act pertain only to the Electronic Credit Ledger, not the Electronic Cash Ledger. The court considered this argument but noted that Section 108 empowers the revisional authority to stay any order under the CGST Act deemed illegal or prejudicial to revenue interests.Issue 3: Applicability of Section 108 of the CGST Act for Staying the Refund OrderThe court scrutinized Section 108, which allows the revisional authority to stay an order if it is erroneous, illegal, or prejudicial to revenue interests. The court found that the revisional authority did not provide any prima facie conclusion that the refund order was illegal or improper. The absence of such a conclusion meant that the power under Section 108 could not have been invoked. The court emphasized that the revisional authority must form an opinion that an order is erroneous or prejudicial to revenue interests before invoking Section 108.Issue 4: Alleged Wrongful Utilization of Input Tax Credit (ITC)The revisional authority doubted the ITC claimed by the petitioner, based on intelligence inputs received after the refund order. The court noted that the alleged improper utilization of ITC was distinct from the refund order and could lead to prospective liabilities. However, it did not justify invoking Section 108 to stay the refund order. The court concluded that the allegation of wrongful ITC utilization had no bearing on the validity of the refund order.Conclusion:The court allowed the writ petition and quashed the order dated 05 July 2023, which had placed the refund sanction order in abeyance. The court granted liberty to the respondents to proceed afresh in accordance with the law, without prejudice to the rights and contentions of the parties.