2026-VIL-1045-TEL
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SGST High Court Cases

GST – Binding nature of Order-in-Appeal under Section 107(16), Operative effect when further appeal is contemplated, Obligation of subordinate authorities to implement appellate order – Appellate Authority allowed assessee’s appeal holding that the restriction under Section 17(5)(d) did not apply since the construction was not undertaken on the petitioner's own account but was intended for leasing - The refund authority declined to process the refund claiming the appellate order was subject to review by competent authority who opined it was not legal and proper – Petitioner contended that Section 107(16) makes the Order-in-Appeal final and binding on parties – Whether refund authority can withhold grant of refund on the ground that Order-in-Appeal setting aside demand has not attained finality and that Department proposes to challenge such order before GSTAT – HELD – A plain reading of Section 107(16) of the CGST Act demonstrates that merely because a further statutory remedy may be available or contemplated, the appellate order does not cease to operate unless it is modified, stayed or set aside in accordance with law - On the date of the impugned order dated 12.01.2026 there was no order under Section 108 nor was there any order of GSTAT, High Court or Supreme Court modifying, staying or setting aside the Order-in-Appeal. The Department's appeal was filed only on 25.03.2026 subsequent to the impugned order. The Order-in-Appeal dated 16.09.2025 remained operative and binding upon the parties as on 12.01.2026 - The subsequent filing of an appeal before GSTAT does not retrospectively render the Order-in-Appeal inoperative as on the date when the impugned order was passed - In the absence of any order staying, modifying or setting aside the Order-in-Appeal, the respondents were required to give due effect to the appellate decision in accordance with law - The mere decision or intention to challenge the appellate order could not have the effect of nullifying, suspending or rendering inoperative the order. The observation that the Order-in-Appeal has not attained finality inasmuch as the competent authority reviewed it and decided to file an appeal cannot justify rejection of refund claim – The refund authority was obligated to give effect to the operative Order-in-Appeal. The rejection of refund claim on the ground that the Order-in-Appeal had not attained finality is unsustainable and set aside – The petition is allowed - GST – Refund authority cannot reopen substantive findings of appellate authority, Impermissibility of indirectly questioning or disregarding appellate determinations, Principle of judicial discipline – The refund authority sought to use refund proceedings to indirectly reopen substantive determination of appellate authority on admissibility of ITC relating to construction of warehouses intended for leasing – Whether refund authority can rely upon depreciation schedules and other material not placed before appellate authority to indirectly question or reopen substantive findings regarding admissibility of ITC already rendered by appellate authority – HELD – The Refund authority while exercising the distinct statutory function of processing refund claim effectively reopened and disregarded findings which had already been adjudicated upon by the appellate authority. The refund sanctioning authority could not use the refund proceedings as a means of reopening or indirectly questioning the substantive determination already rendered by the appellate authority in respect of the disputed ITC - If the respondents considered that the appellate determination required reconsideration in light of any additional material, the remedy lay in pursuing the statutory appellate or revisional mechanism and not in disregarding the operative appellate order at the stage of processing the refund. The refund authority cannot reopen indirectly questioning or refusing to give effect to substantive findings of the operative Order-in-Appeal on the very issue which formed basis of the demand. The aforesaid course of action is contrary to the principle of judicial discipline - The refund proceedings constitute an independent statutory process governed by Section 54 which is distinct from the adjudication proceedings and cannot be converted into a collateral proceeding for reconsidering substantive findings of appellate authority - GST – Statutory mechanism under Section 54(11) for withholding refund, Specific conditions for withholding including opinion of Commissioner and malfeasance or fraud – Refund authority rejected refund application without invoking the specific statutory mechanism under Section 54(11) – Whether refund authority could reject refund application on ground of pending or contemplated appeal without complying with specific statutory mechanism prescribed under Section 54(11) – HELD – Section 54(11) of the CGST Act provides a specific statutory mechanism for withholding a refund where order giving rise to refund is subject matter of appeal or further proceedings or where other proceedings under Act are pending and the Commissioner is of opinion that grant of refund is likely to adversely affect the revenue on account of malfeasance or fraud committed. The provisions specifically contemplate that opportunity of being heard must be afforded to the taxable person before refund is withheld - The petitioner was not afforded any opportunity of being heard before refund was withheld. The respondents could not circumvent the specific statutory mechanism under Section 54(11) by rejecting refund application under Section 54(8) on ground that Order-in-Appeal was under review or proposed to be challenged. If respondents intended to withhold refund they were required to fulfill statutory requirements of Section 54(11) including recording requisite opinion and affording petitioner opportunity of hearing. The mere decision to pursue further proceedings cannot serve as basis for rejecting refund in absence of compliance with Section 54(11) – Refund authority improperly rejected refund application without complying with specific statutory mechanism under Section 54(11).
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