TaxTMI 
TaxTMI 
2026 (7) TMI 75
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....roprietor: Sri Rashmi Ranjan Routray), a sum of Rs. 33,00,000/- was recovered from the petitioner-Rashmi Agency on 10.08.2023, by issue of Show Cause Notice in GST DRC-03 to Hotel Rashmi Plaza directing it to pay the amount towards State GST and Central GST. Such amount is stated to have been paid under protest. 2.1. Appreciating the fact that due to inadvertence said amount was deposited in the account of Rashmi Agency, assigned with GSTIN: 21ABTPR8681C1ZA instead of Hotel Rashmi Plaza assigned with GSTIN: 21ABTPR8681C2Z9, which was under investigation, the appeal preferred under Section 107 of the GST Act assailing refusal to grant the refund claimed by the petitioner vide Order dated 19.10.2023 in Form GST RFD-06, stood allowed vide Order dated 27.02.2026 by the Additional Commissioner of State Tax with the following observation: "The appellant was able to establish that the collection was made during the course of inspection, in contravention of CBIC Instruction No.01/2022-23 and the judicial principle set by the courts. So the tax payer is not liable to pay any tax and interest. In the grounds of appeal, the taxpayer appellant urged several grounds to defe....
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....submitted that the power invoked by DC-opposite party No. 1 under sub-sections (10) read with sub-section (11) of Section 54 of the GST Act^1 which is unwarranted and without authority in law. 3.1. It is vehemently contended that the Commissioner of CT & GST is the empowered authority under the statute to consider whether to withhold the refund and in absence of opinion being formed by the Commissioner of CT & GST, the DC has transgressed his jurisdiction by not considering the refund application and, thereby the authority has disobeyed the appellate order passed by his superior authority, namely the Additional Commissioner of State Tax (Appeal), Cuttack. 3.2. Strenuous argument is advanced to the effect that merely because an appellate remedy is provided in the statute or existence of remedy to challenge the legality of an appellate order, the DC could not withhold the refund on the basis of future contingency. The DC does not possess the inherent power to arrogate to himself the role of the deciding authority whether to file appeal before the Appellate Tribunal. He cannot routinely direct the State to file an appeal before the Appellate Tribunal under the assumption that an....
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....make an attempt to suggest that the order of the DC holding that consideration of the refund application before lapse of six months period stipulated under sub-section (3) of Section 112 would be premature. Doing so in favour of the petitioner would multiply difficulty for the CT & GST Organisation to recover the refunded amount at a later point of time in case the appeal of the State is decided in its favour by the Appellate Tribunal. 5. Heard Sri Pranaya Kishore Harichandan and Sri Pragyant Harichandan, learned Advocates representing the petitioner and Sri Sunil Mishra, learned Standing Counsel being assisted by Sri Seshadev Das, learned Additional Standing Counsel. 6. Perusal of Section 112 of the GST Act makes it abundantly clear that there is scope for the State to approach the Appellate Tribunal against the appellate order within six months from the date on which the said order has been passed. In the present case as the record reveals the appellate order being passed on 27.02.2026, it cannot be comprehended that the State would not approach the Appellate Tribunal on or before 26.08.2026. Be that as it may, from the tenor of order of the DC it seems that as if he has th....
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.... in the Rules and the forms are to be kept in its mind. It cannot be said and in fact it has not been said by the Revenue that any part of statutory rules and forms is redundant or that the power under Section 12(8) of the OST Act can be exercised ignoring the Rules and the statutory forms. In fact, it was not so exercised and the impugned notice was issued under the statutory form, the relevant part of which has been set out previously." 6.4. It can, therefore, be said that the authority specified in Section 54(11) of the GST Act has the power to invoke said provision provided the circumstances mentioned therein existed and complied with. Though there cannot be cavil in this regard, this Court is of the opinion that to exercise the power under Section 54(11) the refund must be the subject-matter of an appeal or further proceedings or where any other proceedings under this Act is pending. 6.5. This apart, the authority concerned is to form opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed. Thus, recording of reasons while passing the order for withholding the refund ....
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....of impugned Order dated 02.05.2026 transpires that the refund application of the petitioner has not been considered on the ground that it would be premature before lapse of six months period envisaged under Section 112(3) of the GST Act for the State to prefer appeal before the Appellate Tribunal and the order of appellate authority having not attained finality the refund application is not to be considered. 7.1. The analysis of provision contained in Section 54(11) of the GST Act empowering the authority to exercise power to withhold refund is strictly circumscribed and the reasons assigned in the impugned order fail to satisfy the specific eventualities mandated by the said provision. Unless there has already been proceeding pending, invocation of said provision smacks arbitrariness and tainted with irrational application of mind. 7.2. In course of hearing, Sri Sunil Mishra, learned Standing Counsel supplied a copy of "Provisional Acknowledgement" in Form GST APL-02A (Part A) evidencing that appeal has been filed before the GST Appellate Tribunal by the State and it discloses that the appeal has been filed on 24.06.2026 (i.e., obviously after receipt of copy of this writ pe....
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....thority in the hierarchy of administration, it would cause chaos in the field of administration and certainly not help in smooth functioning of administration. *** 26. It may be relevant to note here that if an order has civil consequence and adversely affects the party; the affected party must be given an opportunity of hearing before such order is passed. The order passed in exercise of power vested under section 60(1) of the OVAT Act withholding refund due to the dealer is certainly detrimental to the interest of the dealer. Therefore, even though section 60(1) of the OVAT Act does not say for providing an opportunity of hearing to the dealer before passing the order withholding refund, such opportunity of hearing should be afforded to the dealer in the interest of natural justice." 7.4. Prior to filing of appeal before the Appellate Tribunal the authority does not have the authority to assume jurisdiction to withhold refund under Section 54(11) of the GST Act read with Rule 92(2) of the GST Rules. Such proposition can be found from certain decisions referred to infra. 7.5. The Hon'ble Delhi High Court in Truth Fashion Vrs. Commissioner of DGST Delhi, W.P....
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....ing statutory remedy against the orders-in-appeal in accordance with law.' 8. Accordingly, and for all the aforesaid reasons, we allow the instant writ petition and hereby command the respondents to affect the refund to the writ petitioner forthwith together with statutory interest, as payable." 7.6. In a case where the benefit of Order-in-Appeal was denied and refund amount was withheld solely on the ground that the State contemplated to file an appeal assailing the said order, the Hon'ble Delhi High Court in Shalender Kumar Vrs. Commissioner Delhi West CGST Commissionerate, W.P.(C) No.3824 of 2025, decided on 03.04.2025 [2025 SCC OnLine Del 2276] held as follows: "13. A perusal of Section 54(11) of the Act would show that the refund can be held back on the satisfaction of the following two conditions: (i) when an order directing a refund is subject matter of a proceeding which is pending either in appeal or any other proceeding under the Act; and (ii) thereafter the Commissioner gives an opinion that the grant of refund is likely to adversely affect the revenue. 14. In the opinion of this Court the Department's opinion under Section....
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....aid order. Indisputably, the Order-in-Appeal dated 03.01.2022 cannot be ignored by the respondents solely because according to the revenue, the said order is erroneous and is required to be set aside. 13. Learned counsel for the parties also pointed out that the said issue is covered by the earlier decision of this Court in Brij Mohan Mangala Vrs. Union of India, (2023) 115 GSTR 259 = 2023 SCC OnLine Del 8202. 14. In view of the above, the present petition is allowed. The respondents are directed to forthwith process the petitioner's claim for refund including interest. 15. It is, however, clarified that this would not preclude the respondents from availing any remedy against the Order-in-Appeal dated 03.01.2022 passed by the Appellate Authority. Further, in the event, the respondents prevail in their challenge to Order-in-Appeal dated 03.01.2022, the respondents would also be entitled to take consequential action for recovery of any amount that has been disbursed, albeit in accordance with the law.' 15. In view of this position, the refund in favour of the Petitioner would be liable to be allowed in terms of the order passed by the Appellate Aut....
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....tion prior to filing of appeal before the Appellate Tribunal or contemplating to file appeal under Section 112 of the GST Act is not tenable in the eye of law. It needs to be highlighted that the State has filed appeal before the GST Appellate Tribunal on 24.06.2026, after receipt of copy of the writ petition (filed on 30.05.2026). As on 02.05.2026, when the impugned order was passed, it is demonstrably manifest that there was neither appeal pending before the GST Appellate Tribunal nor did any other proceeding. Hence, there was no scope or occasion for the Deputy Commissioner of CT & GST, CT & GST Circle, Cuttack-I City, Cuttack to refuse to consider the refund application. Thus, he had no jurisdiction to invoke provisions of Section 54(11) of the GST Act in the garb of holding that the consideration of refund application is premature. 9. In the result, the Order dated 02.05.2026 passed by the Deputy Commissioner of CT & GST, CT & GST Circle, Cuttack-I City, Cuttack is set aside and the matter is now remitted to the said authority for fresh consideration of the application filed for grant of refund of Rs. 33,00,000/- within a period of two weeks from the date of production of c....