M/S. Shm Trading Company And Ors. vs. Union Of INDIA And Ors.
Original PDF →Facts
The petitioner, M/s SHM Trading Company & Ors., filed a writ petition challenging an order dated August 27, 2024, passed by the Appellate Authority. This order allowed a departmental appeal against a refund sanction order dated May 11, 2023, and a subsequent review order dated November 8, 2023. The Appellate Authority's decision was based on the refund sanctioning authority's alleged mechanical approach in issuing the refund and failing to correctly verify the reason for credit accumulation, despite both inward and outward supplies pertaining to the same tax rate category. The Appellate Authority did not decide on this core issue, instead setting aside the refund order as a non-speaking order.
Held
The Court held that the order passed by the Appellate Authority under Section 107 of the CGST Act, 2017, was an unreasoned and non-speaking order. While the Appellate Authority noted that a primary issue was whether the refund sanctioning authority had correctly identified the reason for credit accumulation, it failed to decide this substantive point. Instead, it set aside the refund order on the ground of it being a non-speaking order. The Court found this reasoning to be equally applicable to the Appellate Authority's own order. Therefore, the Court decided that the matter should be remanded back to the Appellate Authority for passing a reasoned order. This would involve providing an opportunity for a hearing to the petitioner and verifying the petitioner's eligibility for refund under Section 54(3)(ii) of the CGST Act, 2017.
Key Issues
1. Whether the order passed by the Appellate Authority under Section 107 of the CGST Act, 2017, is a reasoned order, considering the grounds on which it was passed? 2. Whether the Appellate Authority correctly addressed the issue of the refund sanctioning authority's verification of the reason for credit accumulation, as stipulated under Section 54(3)(ii) of the CGST Act, 2017? Petitioner's Contentions: The petitioner argued that the Appellate Authority's order was itself unreasoned and a non-speaking order, mirroring the grounds on which the refund order was set aside. They contended that the Appellate Authority failed to decide the substantive issue regarding the correct verification of the reason for credit accumulation. Revenue/State's Contentions: The judgment does not record specific contentions made by the Union of India or the CGST & CX respondents. However, their appeal to the Appellate Authority was allowed, implying they argued for the setting aside of the refund order.
Sections Cited
Section 107, Section 54(3)(ii)
AI-generated summary — verify with the full judgment below
g.b. 07
2025 Ct. No.05
WPA 63 of 2025 M/s SHM Trading Company & Ors. Vs. Union of India & Ors. Mr. Debdatta Saha Mr. Rhiddhiman Mukherjee Mr. Abhik Chitta Kundu …….For the Petitioner Mr. Amal Kumar Datta Mr. Subrata Ray …..For the Union of India Mr. Bhaskar Prosad Banerjee Mr. Tapan Bhanja …..For Respondent CGST & CX
Affidavit of service filed in Court today is taken on record.
Challenging the order dated 27th August, 2024 passed by the Appellate Authority in FORM GST APL-04 whereby the departmental appeal challenging the refund sanction order dated 11th May, 2023 and the review order dated 8th November, 2023 was allowed, the instant writ petition has been filed.
Prima facie it appears to this Court that the order passed by the Appellate Authority under Section 107 of the CGST Act, 2017 is an unreasoned order. Although one of the grounds for allowing the appeal was the mechanical approach in issuing the refund order and the order not recording correct verification of the reason of accumulation of credit,
as both inward supply and outward supply pertains to the same rate categorise, the appellate authority also did not decide on the same. Despite the appellate authority noting that the main issue in the case was whether the refund sanctioning authority correctly mentioned the reason for accumulation of credit, no attempt was made by the appellate authority to decide the same. By treating the same as a non-speaking order the same had been set aside. Since, one ground of challenge by the department was with regard to non-speaking nature of the order, I am of the view that the same ground is also equally applicable to the order passed by the Appellate Authority.
Having regard to the above, this Court is of the view that the matter should be remanded back to the Appellate Authority for passing a reasoned order and upon giving an opportunity of hearing to the petitioner and by verifying the credential of the petitioner having regard to the scope of refund under Section 54(3) (ii) of the said Act.
With the above observation and direction WPA 63 of 2025 stands disposed of. There shall be no order as to costs.
All parties are to act on the server copy of this order duly downloaded from the official website of this Hon’ble Court. (Raja Basu Chowdhury, J.) 2
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Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.