Section 108(2) of the Central Goods and Services Tax (CGST) Act, 2017, restricts the Revisional Authority from exercising its powers over orders that have already been appealed. The phrase "the order has been subject to an appeal" refers to situations where the decision or order in question has been formally challenged and is currently under consideration by an appellate body. This encompasses appeals filed under various provisions, including sections 107, 112, 117, or 118 of the Act.
Your understanding aligns with this provision: if an order is pending appeal before any of these forums, it falls outside the Revisional Authority's jurisdiction under Section 108. This ensures that the appellate process is not bypassed and that the Revisional Authority does not overstep by revisiting matters already under appellate review.
For further clarity, the Delhi High Court addressed a similar issue, ruling that the Commissioner cannot, under Section 107(2), review an order passed by the Appellate Authority. The court emphasized that the Commissioner's powers are confined to examining records of proceedings before adjudicating authorities, not appellate bodies.
Therefore, it is advisable to await the outcome of any pending appeals before considering further actions, as the Revisional Authority's powers are limited in such contexts.
Delhi High Court Rules Against Commissioner Reviewing Appellate Orders Under GST
Introduction:
In a landmark decision clarifying the scope of Section 107(2) of the Central Goods and Services Tax Act, 2017, the Delhi High Court quashed an order passed by the Commissioner of Central Tax and GST, Delhi (West), which sought to review a refund sanction issued in compliance with an order from the Appellate Authority. A division bench comprising Justices Yashwant Varma and Dharmesh Sharma held that the Commissioner cannot, under Section 107(2), sit in appeal over an order passed by the Appellate Authority, thereby upholding the sanctity of appellate decisions. The judgment came in a writ petition filed by M/S G.S. Industries, which challenged the Commissioner’s decision to set aside the refund sanction, arguing that it was an overreach of jurisdiction.
Arguments of Both Sides:
The petitioner, represented by advocates Siddharth Malhotra and Ritika Goel, argued that the Commissioner’s impugned order dated 24 May 2024 was ultra vires and beyond the scope of powers conferred under Section 107(2). They contended that the refund in question was sanctioned pursuant to the Appellate Authority’s order dated 3 January 2022, which allowed their appeal against the initial denial of refunds. It was submitted that the Commissioner’s action of reviewing the refund sanction effectively amounted to sitting in appeal over the Appellate Authority’s decision, which is impermissible under the CGST Act. The petitioner emphasized that the Respondent-Department had not challenged the Appellate Authority’s order, and thus, the Commissioner’s review was a blatant disregard of the established legal process.
On the other hand, the respondents, represented by senior standing counsel Aditya Singla and advocate Umagn Misra, argued that the Commissioner was well within his rights under Section 107(2) to examine and review the refund order passed by the adjudicating authority. They claimed that the review was necessary to ensure the legality and correctness of the refund sanction. However, the respondents could not justify why the Appellate Authority’s order, which formed the basis of the refund sanction, was not challenged if it was deemed erroneous.
Court’s Judgement:
The Delhi High Court delivered a comprehensive judgment, firmly establishing the limitations of the Commissioner’s powers under Section 107(2) of the CGST Act. The Court began by noting that the refund sanction dated 9 June 2023 was issued in compliance with the Appellate Authority’s order dated 3 January 2022, which had allowed the petitioner’s appeal against the denial of refunds. It emphasized that the Appellate Authority’s decision was binding and had not been challenged by the Respondent-Department. Consequently, the legal position established by the Appellate Authority remained unaltered and binding on all parties.
The Court underscored that Section 107(2) empowers the Commissioner to call for and examine records of proceedings in which an adjudicating authority has passed an order. However, this power is limited to ensuring the legality of the adjudicating authority’s decisions and does not extend to orders passed by the Appellate Authority. It held that the Commissioner’s review of the refund sanction was, in essence, an indirect attempt to overturn the Appellate Authority’s order, which is beyond the scope of Section 107(2). The bench remarked that allowing such an overreach would undermine the appellate process and render appellate orders meaningless.
The Court also highlighted the lack of justification from the respondents regarding their failure to challenge the Appellate Authority’s order. It observed that the Commissioner’s actions reflected an attempt to bypass due process and disrupt the petitioner’s legitimate entitlement to refunds. The judgment further clarified that the power of review under Section 107(2) is confined to adjudicating authority proceedings and cannot be stretched to include appellate orders.
In conclusion, the Court quashed the Commissioner’s impugned order dated 24 May 2024, which set aside the refund sanction. It reaffirmed the petitioner’s entitlement to the refund as sanctioned on 9 June 2023 and ruled that the claim could not be denied at this stage. The Court allowed the writ petition, thus safeguarding the petitioner’s rights and reinforcing the sanctity of appellate decisions under the CGST Act.
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