Omega Qms. vs. Commissioner, CGST, Delhi West & Anr.

Facts

The Petitioner, Omega QMS, challenged an order dated March 4, 2025, by the Commissioner, CGST, which withheld a refund of Rs. 83,46,169/-. The Petitioner's refund claim for FY 2019-20 was initially rejected. However, the Appellate Authority, by an order dated June 20, 2022, set aside the rejection and granted the refund. Subsequently, the CGST Department decided to review the Appellate Authority's order and issued an opinion under Section 54(11) of the CGST Act, 2017, stating that processing the refund would be contrary to the revenue's interest. This opinion led to the impugned order withholding the refund. The Petitioner argued that the Appellate Authority's order stands as it has not been challenged or set aside, and the opinion under Section 54(11) is invalid without a pending appeal.

Held

The Court held that the Department's opinion under Section 54(11) of the CGST Act, 2017, cannot be relied upon in isolation to withhold a refund. For the refund to be held back, two conditions must be met: (i) the order giving rise to the refund must be the subject matter of a pending appeal or other proceedings, and (ii) the Commissioner must form an opinion that granting the refund is likely to adversely affect the revenue. In this case, the Appellate Authority's order granting the refund had not been appealed against or set aside, and no order had been passed in review. Therefore, the Department could not withhold the refund based solely on the opinion under Section 54(11). The Court followed its previous decisions in G.S. Industries and Shalender Kumar, which held that refund processing cannot be denied merely because the Revenue intends to file an appeal. The Court directed the refund to be processed along with interest within two months, to be credited by September 30, 2025, subject to the outcome of any future appeal filed by the Department against the Appellate Authority's order.

Key Issues

1. Whether the Commissioner can withhold processing and sanctioning of a refund under Section 54(11) of the CGST Act, 2017, solely based on an opinion that processing the refund is likely to adversely affect the revenue, when the order directing the refund has not been appealed against or set aside by any higher forum? Petitioner's Arguments: The Petitioner contended that the opinion issued under Section 54(11) of the CGST Act, 2017, is invalid and cannot be the basis for withholding the refund. They argued that the Appellate Authority's order granting the refund remains valid as it has not been challenged or set aside. The Petitioner relied on the decision in G.S. Industries v. Commissioner Central Goods and Services Tax Delhi West & Ors. to support their claim that refund processing cannot be held back without a pending appeal or stay order against the Appellate Authority's decision. Revenue's Arguments: The Revenue submitted that they intend to file an appeal against the Appellate Authority's order dated June 20, 2022. However, they acknowledged that no appeal has been filed as the Appellate Tribunal is not yet constituted. The Revenue attempted to distinguish the G.S. Industries case by stating that in that case, there was no opinion issued under Section 54(11) of the Act.