Commissioner Independently Empowered To Withhold Refund U/s. 54(11) CGST Act If It Thinks It Would Adversely Affect Revenue In Pending Appeals: Delhi HC

The Court quashed the order passed under Section 108 of the Central Goods and Services Tax Act, 2017 (CGST Act) which placed in abeyance the refund sanctioned to M/s HCC VCCL Joint Venture (Petitioner). Section 108 of the CGST Act allows the revisional authority to stay or revise decisions made under the CGST Act if found illegal, improper, or prejudicial to the interest of revenue.

A Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja held, “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). Thus refund, be it from the Electronic Cash or the Electronic Credit Ledger, are essentially treated at par. By virtue of Section 54(11), the Commissioner stands independently empowered to withhold a refund if it be of the opinion that the grant thereof would adversely affect the Revenue either in an appeal which may be pending or in any other proceedings on account of malfeasance of fraud that may have been committed.”

Advocate Bharat Raichandani appeared for the Petitioner, while CGSC Ravi Prakash represented the Respondents.

The refund order pertained to amounts in the Petitioner’s Electronic Cash Ledger, credited through deductions under Section 51 of the CGST Act by the Delhi Metro Rail Corporation. The Petitioner contended that these amounts were eligible for refund under Section 54(1) of the CGST Act after tax and other dues were paid.

The order placed the refund in abeyance for six months, subsequently extended to two years by a corrigendum. The revisional authority cited alleged improprieties in Input Tax Credit (ITC) utilization and other matters as reasons for invoking Section 108.

The High Court noted that the allegations of improper ITC utilization pertained to separate proceedings initiated after the refund was sanctioned. These allegations could not retroactively affect the validity of the refund order.

“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,” the Court explained.

Consequently, the Court held, “The pre-requisite condition for invocation of Section 108 is the formation of an opinion that an order made under the CGST Act is erroneous, prejudicial to the interest of the Revenue, illegal or improper. By virtue of Section 108 the Commissioner is also empowered to invoke its revisional authority in a situation where it comes to the conclusion that the order under scrutiny was made without taking into account certain material facts whether available at the time of making of that order or not as well as in consequence of an observation rendered by the Comptroller and Auditor General of India.”

Accordingly, the High Court allowed the Writ Petition.

Cause Title: M/S HCC VCCL Joint Venture v. Union Of India & Ors. (Neutral Citation: 2024-DHC-8662-DB)

Appearance:

Petitioner: Advocates Bharat Raichandani, Deepak Kumar Khokhar and Anweshaa Laskar

Respondent: CGSC Ravi Prakash; SSC Aditya Singla; Advocates Ritwik Saha and Medha Navami

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