TaxTMI 
TaxTMI 
2026 (10) TMI 243
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....0,605/-. 2. The principal and limited question which has fallen for consideration of this Court is whether the Respondent No. 1 has rightly invoked Section 54(11) of the Act of 2017 for withholding the amount of refund claimed by the Petitioner. A. BRIEF FACTUAL BACKGROUND: 3. In order to appreciate the present controversy, the facts in brief are required to be noticed. 4. The Petitioner, engaged in the business of exporting microphones, telephone sets, smartphones, monitors, projectors, automatic data processing machines and related parts and accessories was registered under GSTIN 07AAACD0720F2ZB. During the period from November 2023 to January 2024, the Petitioner exported goods on payment of IGST, and consequently, filed five (05) refund applications seeking refund of Rs. 1,35,69,527.58/- Rs. 43,11,670.36/ Rs. 34,92,046.08/ Rs. 67,97,817/- and Rs. 33,59,544.01/- aggregating to Rs. 3,15,30,605.03/-. 5. The aforesaid refund applications were processed by the Respondent No. 2, Show Cause Notices ('SCNs') rejecting the refund also came to be issues in respect of the claims so made, alleging, inter alia, that the refund applications had been filed without the requisite....
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....In substance, the case of the Petitioner is that the refund sanctioned by the OIA could not have been withheld under Section 54(11) of the Act of 2017, since on the date of its passing, no appeal against the OIA or the Impugned Order was pending before the GSTAT, nor was any other proceeding pending against the Impugned Order. 10.2 It is argued that the mere possibility or contemplation of filing an appeal under Section 112 of the Act of 2017 could not, according to the Petitioner, constitute a pending proceeding so as to justify withholding of the refund. In this regard, it has also been argued that an appeal before the GSTAT only came to be filed on 10.04.2026. Reliance in this regard is placed on Mandy Enterprises v. Deputy Commissioner (2024) 22 Centax 534 (Del.) and Alex Tour Tavel v. Asst. Commissioner CGST W.P.(C) No. 5722/2023. 10.3 It is further contended that an investigation or inquiry cannot, by itself, be equated with a proceeding pending under the Act of 2017 for the purposes of Section 54(11). In this regard, reliance is placed on Liberty Oil Mills v. Union of India MANU/SC/0029/1984, G.K. Trading Company v. Union of India 2021 (51) G.S.T.L. 288 (All.) and Sric....
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....dents' reliance on the GSTAT appeal acknowledgement, does not, by itself, establish that a duly instituted appeal was pending and it is unclear whether the appeal was genuinely pursued or merely filed as a formality. 10.11 In substance, the Petitioner's case is that the refund sanctioned by the OIA could not have been withheld under Section 54(11) on the basis of a contemplated or subsequently instituted appeal, an investigation which did not constitute a pending proceeding on the relevant date, or an unadjudicated SCN. In the absence of a judicial stay and there being no statutory appellate remedy against the Impugned Order itself, the Petitioner contends that the withholding of the refund was legally unsustainable. 11. Per contra, learned counsel representing the Respondents has made the following submissions: 11.1 At the outset, it has been argued that the present Petition is not maintainable, inasmuch as the OIA dated 19.06.2024 has been reviewed by the Competent Authority and a decision has already been taken to challenge the same before the GSTAT. Accordingly, it is contended that the Petitioner ought to pursue the statutory appellate remedy. 11.2 It is argued tha....
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....A. 11.7 Lastly, distinguishing the judgments in Mandy Enterprises (Supra) and Alex Tour and Travel Pvt. Ltd.(Supra) relied upon by the Petitioner, it has been argued that the same are distinguishable. Since, the said judgments did not concern withholding of refund pursuant to a specific order passed under Section 54(11) of the CGST Act. The Respondents accordingly contend that those decisions do not govern the present case. C. ANALYSIS AND DISCUSSION: 12. Heard learned counsel representing the parties and with their able assistance perused the paperbook. 13. Before proceeding to deal with the rival contentions, it is necessary to notice the text and scope of Section 54(11) of the Act of 2017, which reads as follows: "54. Refund of tax.- (11) Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the 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, he may, after giving the taxable person an opportunity of being heard, ....
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....a Division on 26.03.2024, i.e., nearly three months prior to the OIA dated 19.06.2024 and nearly six months prior to the Impugned Order dated 24.09.2024. This is borne out by the contemporaneous record and is subsequently reflected in the SCN dated 21.08.2026, which traces the investigation from the receipt of adverse verification reports, through physical verification of suppliers, verification of suppliers, verification of transportation, examination of the goods purportedly exported, and recording of statements under Section 70 of the Act of 2017, culminating in the quantification of allegedly inadmissible ITC of Rs. 6,53,08,612/-. 19. The SCN records the following verification reports, each of which pre-dates or coincides with the passing of the Impugned Order: "5.1 A letter dated 24.12.2024 was received from the State Tax Office. Kanpur (RUD-1), wherein it was informed that M/s Kanpur Mobiles (GSTIN: 09AARFK|496PIZA), appearing at Serial No. I of the above-mentioned Table, was found to be a bogus/non-genuine entity. As per the said communication, the said entity was found to be engaged in availing and passing on fraudulent and inadmissible Input Tax Credit (ITC) wi....
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....s recommended. Further, the Divisional Office also received a physical verification report from the State GST Office, Ward-6, Faridabad (East) (RUD-7), wherein it was reported that M/s Balaji Mobile Hub (GSTIN: 06EFLPM8246C229) was found non-existent at its registered Principal Place of Business. These reports raised serious doubts regarding the genuineness of the supplies and the corresponding ITC passed on to the Noticee. 6.3 From the above investigation and verification, it is observed that the actual movement of goods corresponding to the supplies reported by the Noticee could not be established. The vehicle owners whose vehicles were shown in the relevant e-way bills, in their statements recorded under Section 70 of the CGST Act 2017, denied having transported the goods from the concerned suppliers to the Notice. Some of them also stated that they had no knowledge of the Noticee or the suppliers mentioned in the e-way bills. Further, some summonses issued to vehicle owners were returned back. These facts, taken together, indicate that the vehicles mentioned in the e-way bills were not established to have transported the goods. Accordingly. the genuineness of the repor....
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....ed. 22. It is also necessary to notice that the Commissioner, while passing the Impugned Order itself, did not act on a mere apprehension; he examined, in some detail, the tier-wise (L1, L2 and L3) supply chain of the Petitioner's suppliers and their status on the GST portal. The relevant findings read as under: "13.6 Further in respect of M/S ALMEC TRADING (GSTIN: 09KXJPS6728DIZS), L-1 supplier verification of M/s Almee Trading (GSTIN-09KXJPS6728D1ZS was carried out by Deputy Commissioner (SIB) SGST, Sector-D, Kanpur wherein vide letter 31e/ RI. 47 ReT 79/Kanpur dated 20.09.2023 has informed that the Physical verification of the principle place of business 543, Faithful Ganj Cantt, Kanpur Nagar, Kanpur Nagar, Uttar Pradesh, 208004 of M/s Almec Trading was conducted an 20.09.2023 and no business activities was found and also no stock was found in the said premises. Also the GSTN portal is still reflecting the GST registration status of M/s Almec Trading as 'Cancelled suo moto? Accordingly, the unit was found to be non-existent at their registered address. 13.7 Moreover, the other major L1 supplier and 12 level suppliers i.e. Mis ZIAVLO INDIA PRIVATE LIMITED....
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....er person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (c). subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, cither in cash or through wiilisation of input tax credit admissible in respect of the said supply; and (d.) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner....
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....hereinabove were not met, rightly passed the Impugned Order. Examination of the Petitioner's contentions 25. Turning to the specific contentions urged on behalf of the Petitioner, it was argued that on the date of the Impugned Order, no appeal against the OIA or the Impugned Order was pending before the GSTAT, the appeal having been filed only on 10.04.2026, and that mere contemplation of an appeal could not satisfy the first limb of Section 54(11). The contention, even if accepted, does not conclude the matter, since the Impugned Order was not founded upon the first limb alone. 26. The second limb of Section 54(11), namely, the pendency of any other proceedings coupled with the Commissioner's opinion of fraud or malfeasance, was invoked on the basis of the AEW investigation which had commenced by 26.03.2024. Thus, even in the absence of a pending appeal on 24.09.2024, an investigation concerning the Petitioner was admittedly underway. The Commissioner formed his opinion in the context of invoices allegedly issued by non-existent suppliers, without corresponding movement or receipt of goods, and the consequent availment of ITC for payment of IGST on the exports for which r....