M/S. Adv Industrial Services Private Limited vs. The Union Of INDIA
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Cause title — parties, addresses and appearances
The Court made ther following: ORDER
IN THE HIGH COT'RT FOR THE STATE OF TEIIINGANA AT TIYDERABAD THE HON'BLE THE CHIEF JUSTICE SRI APARESH KT'MAR SINGH AND THE HON'BLE SRI JUSTICE G.M.MOHIUDDIN WRIT PETITION No.3663 of 2o26 [CNR No. HBHCo 10070742026l DATE:og.O9.20?6 BETWEEN: M/s. ADV Industrial Services Private Limited ....Petitioner AND The Union of lndia Through its secrelary, Ministry of F.inance, Department of Revenue and ol.hers ..,.Respondents ORDER Heard Sri Avinsah Desai, learned Senior Counsel representing Sri Kopal Sharraf, learned counsel for the petitioner; Ms. Bokaro Sapna Reddy, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC) appearing for respondent Nos.2 and 3; and Mr. Dominic F'ernandes, learned counsel for respondent Nos.4 to 6 - DirecLorate General oi GST Intelligence (DGGI) and perused the record. 2, The present writ petiLion is filed with the following prayer: ". . .. . . fo lssue a Lurit or an order or q direction, truore particularlg a uit tn the nature of Mandamus: t) Declaing Lhe actions of Respondent No. 7 is passtng the Reluncl Rejection Order dated 12.01.2026 in llonn GST'RI.-D..O6 beaing ARN nunlber AA361025043A86J as being
2 illegal, arbitrary, unconsltlutional and witltout juri iction and ir-t contrauettion to the prouisrorts of the Central Goods and Serutces Act, 2017 an'7 consequentlg; Direct the Respondent No.7 to sanctton the refund application of the Petitioner /or Rs. 19,33,34,320/- paid/reuzrsed bg the PetttiorLer uide DRC 03, bA scttin(l aslde the Refund Rejectton Order dated 12.01.2026 in l,^orm GST-RFD-06 bearing t\RN number A436102 504 3086J; and pass such other order or orders as thts Court maa deem Jit and proper Ln the drcumstances of the ca:;e . " Factual Matri<
The petilioner is a privatc limited Company engaged in the business of renting and leasing pre-fabricated warehouse buildings to its clients/ ()ustomers. 'lhe pelitioner is duly registered under the Central Goods and Services 'lax Act, 2O\7 (for short 'CGST Act') and has been regularly filing its GST returns for the relevant periods, inclucing from 2017- 18 to 2O2l-22. 4. The gen:sis of the prcscnt dispute lies in an investigation initiated try the Directorate Gencral of GST Intelligence (DGGI), Hyderabad Zo oal Unit. On 76.09.2022, the petitioner received a summons uncer Section 7O of thc CGST Act, calling upon it to produce certain documents in connection with an enquiry into the alleged availmr:nt of ineligible Input Tz:.x Credit (lTC) purportedly in contravention :f Section 17 of the CGST Act.
During the course of investigation, the DGGI authorities alleged that the petitioner had availed ineligible iTC amounting to Rs.19,33,34,3:10l- in respect oi works contract services received for construction of warehouses, lvhich according to the Department
a was blocked under Section 17(5) of the CGST Act. The petitioner states that during the investigation and under protest, it was compelled to reverse/ pay the aforesaid amount, as follows: a) Rs. i 5,99 ,60,570 I - was reversed from the unutilized ITC balance through porm GST DRC_03; and b) Rs. 3,33,73,7501- was paid in cash through porm GST DRC_ 03 in insralments.
The petitioner consistently maintained that it was legally entitled to avail the said ITC and communicated [he same to the respondents. In particular, the petitioner relied upon the judgment of the Orissa High Court in Scafart Retreats priuate Limited. a. Chief Comrnisstoner of Centrat Ggods and Service ?axr, which was then pendrng consideration before the Hon,ble Supreme Court.
Thereafter, following the investigation, a show_cause notice dated 15. 12.2023 was issued to the petitioner under Section 74 of the CGST Act, alleging irregular availment of ITC and proposing recovery of the said amount together with applicable interest and penalty.
The petitioner duly filecl its reply to the show-cause notice and participated in the personal hearings. However, respondent No.3 passed Order-in-Original No.TSl2024-2S_Adjn(ADC)-cST dated 13.09.2O24 (for shorr ,Order_in_OriginalJ, confirming the ' 2019 SCC Online ori 443
4 demandofRs.l),33,34,3201-alongwithapplicablein|erestand penaity. The O rder-in-Origrnal further appropriated the entire amount of Fls.19,33,34,320/- u'hich had alreadv been paid/reversed b'/ the petitioner through Form GST DRC-03
Aggrievecl by the Order-in-Original clated L3 'O9 '2024 ' t}:re petitioner preferred an appeal beforc respondent No 2' The appeal was numberec. as Appeal No BO / 2024-RR-GST-Comm After hearing the parties and considerjng Lhe matcrial placeo on record' respoadent No. 2 passed Order in-Appeal No HYD-GST-RRC-APP1- 41-2025-26, clated 16'09 2025 ' lfor short 'Order-in-Appeal')' allowing the appeal and setting aside the Order-in-Original'
In the r)rder-in-Appeal dated 16 og '2025 ' the appellate authority unde rtook a detailed examination of the applicability of Section 17(5)(c) and (d) of the CGST Act and recorded' inter atia' the followit-rg findings: a)Therest:ictroncontemplatedunderSectionlT(5)(c)washeld to operate in the context of works contract services and the relevanl statutory scheme ancl the appellate au1-hority found that the provision could not sustain the demand against the petitionr)r in the facts of the present case Section i7(5)(d), the appellate authority b) In restrrect of examint:d whether thc relevanL goods and selwices had been 5 received for construction of an immovable property on the taxpayer s "own account", c) Relying upon the judgment of the Hon,ble Supreme Court in Chlef Commisstoner oJ Centrat Good.s and Seny'',ce Tax q.nd. others a. Safari Retreats private Llmited. o.nd others2, the appellate authority held that construction intended to be sold or given on lease or licence could not be regarded as construction undertaken on the taxpayer,s own account in the manner contemplated under Section 17(S)(d). d) Applying the tests laid down-by the Hon'ble Supreme Court in Bharati Alrtel Limtted u. Commisstoner oJ Central Excise, Pune3, the appellate authority examined the nature of annexation, object of annexation, intention of the parties, functionality, permanency and marketability of the relevant components and concluded that the superstructure and Kirby steel constituted movable property. e) The appellate authority further held that items such as electrical installations, fire hydrants, sprinklers and painting were not covered by the restriction contained in Section 1 7(s)(d) . f) In respect of the sub-structure, 1.S meter wall, dock area, flooring and apron, although the appellate authority treated '? 1zozs1 z scc s23 3 zozs 1se ry ELT.3 (s.c.)
6 these corrrponents as immovable property' it held that the restricdonunderSectronlT(S)(d)didrrotapplysincethe constructionwasnoLundertakenonthepetitioner.sown account but was inter-rded for leasing' On the basis of the aforesaid findings' thi: appellate authority conr;luded that the demand confirmed by the adjudicatir-rg aL thority was unsustainable and accordingly passed the following oP erative order: "The appeaL is allolued and the impugned order is set oside'" 1 1. Consequr:nt upon the Order:in-Appeal' the petitioner filed an application for refund in Form CIST RFD-01 dated 28' 10 2025' seeking refund of Rs 19,33,34,320/- 'lhe application was acknowledged bY the DePartment 1t.r1.2025. uide Form GST-RPD-O2 dated
On 05 12.2025, respondcnt No 7 issued a notice for Rejection of A1:plication for Refund in Form GST-RFD-O8' seeking cel.taininformationanddocumcnts,includingcopiesoftheDRC- 03 challans, letails of the payments reflected in tne GSTR-3B returns and a certificate relating to unjust enrichment The petitioner dull responded to the said notice uide its reply dated IO.12.2025 a1ld furnished the information and documents sought by the respondent, including the Chartered AccoLlntant s (CA) Certificate relzr.ting to unjust enrichment'
7
Thereafter, instead of deciding the refund application on the basis of the material already furnished, respondent No.7 issued a further notice for Rejection of Application for Refund dated 24.12.2025 raising additional grounds for proposed rejection. The petitioner submitted a detailed reply dated 29.t2.2025 dealing with and refuting the grounds raised therein. Respondent No.7 thereafter passed the impugned Refund Rejection Order dated 72.O1.2026 in Form GST-RFD-O6, rejecting the petitioner,s refund claim in rts entirety. Submissions on behalf of the petitioner 14, The learned Senior Counsel for the petitioner advanced the lollowing submissions: i) That Section 107(16) of the CGST Act, 2O).7 provides that subject to Sections 108, 113, 717 and l1g of the CGST Act, an order passed by the appellate authority under Section 1O7 shall be final and binding on the parties. Section 107(16) reads: "SubJect to the prouisions of sectton I Og or sectton 1 13 or section 117 or sectton 118, an order passed. bg the AppelLate AuthoitA under this sect[on shall be finaL and binding on the parties.,, ii) That, as on the date of the impugned order dated 12.O1.2026, no order had been passed under Sections 10g, 1 13, 117 or 118 of the CGST Act modifying, staying or _setting aside the Order_in_Appeal dated 16.O9.2025. 8 Therefore, the Order-in-Appeal remained operative and binding upon the parties and was required t') be given effect to by the subordinate authorities The record it.seif shows that the respondents had merely reviewed the Order-in- Appeal, fc,rmed an opinion that the same was nol legal and proper, arrd decidecl to prefer an appeal beforr: the GSTAT' iii) That the cetitioner relies upon the settled principles' that an order pa:;sed by a compctent appellate authority remains operative unless and unril it is stayed' modified or set aside by a competent authority; The mere contemplation or filing of an appe.-1 does not, by itsell, operate as a stay of the order under challenge; and Subordinate authorities are required to followandimplementtheordersofsuperiorappellate authorities and cannot refusc to do so merely because the l)epartment proposes Lo challenge' or disagrees with' such order iv) That rer;pondent No 7 could not have rejectecl the refund applicat.on on the ground that the Order-in-Appeal was "not the Departmcnt had decide d to legal and prefer itn effectivelY questiotr proper" or lhat appeal before the GSTAT Such an aPProach permits the refund adjudicating authority to and disregard the findings of the competent appellate authority, which is rmpermissible
9 v) That the relief sought in the appeal before the appellate authority included setting aside of the Order_in_Original with all consequential reliefs. The Order_in_Appeal dated 16.09.2025 allowed the appeal and set aside the Order-in_ Original dated 13.09.2024, pursuant to which the demand of Rs. 19,33,34,320 I - had been confirmed and the amounts paid/reversed through DRC-03 had been appropriated. vi) That the setting aside of the demand gave rise to the petitioner's claim for consequential refund, subject to the following statutory requ irements governing refund under Section 54 of the CGST Act, which are as follows: a) The petitioner furnished the documents and particulars in support of its refund claim, including the DRC-03 challans and other relevant records; b) The petitioner furnished the CA,s Certificate concerning unjust enrichment; and c) The refund application was filed within the period prescribed under Section 5a(1) of the CGST Act, read with the relevant-date provision applicable to a refund arising pursuant to an appellate order. That the observation of respondent No.7 that the Order_in- Appeal "does not direct refund,, is mrsconceived. The absence of an express direction for refund in the Order_in_
10 Appeal does not, by itself, authorize a subordinate refund authority [o disregard thc appellate finclings or to reopen the substantil,equestionofadmissibilityofthelTCu,hichstood adjudicatt:d by the appellate authority' vii) That the :mpugned order discloses that the decision-making process u as materially influenced by the review section and the opinir>n of the "competent authority" ' Paragraph 1 1 3 of the impr-rgned order records that the refund processing ofltcer communicated with the revieu' section and that the competent authority had opihed that the refund could not be granted and that the Department had decidecl to fi1e an appeal allainst the Orde r-in-$ppeal' viii) That while respondent No 7 was required to independently adjudicate the refund application on the basis of the material placed l>efore it, the impugned order rndicates that the decisionwasmateriallyguidedbytheDepartment,sproposed challenge to specificeLllY the Order in Appeal The petitioner had submitted replies dated lO 12 '2025 and 29.12.2025 to the notices clated 05 12'2025 an<\ 24'12'2025 resPectivelY. ix) That if r-he respondents apprehended that implementation of the Orcer-in-Appeal and consequent grant of refund would adversely affect the revenue because of the Department's
11 proposed challenge, the strictly within the withholding of refund. respondents were required to act statutory framework governing x) That the following statutory requirements under Section 54(11) were whollv absent: a) As on 12.01.2026, no appeal against the Order-in- Appeal had been filed before the GSTAT. The Department subsequently filed an appeal on 25.O3.2026, i.e. after the impugned order; and b) The impugned order does not allege any malfeasance or fraud on the part of the pctitioner. xi) 'I'hat the respondents could qot treat the mere decision or intention to challenge the Order_in_Appeal as equivalent to an order staying, modifying or setting aside the same. If the respondents sought to withhold the refund under Section 54(1 1), the statutory conditions governing such withholding, including the requisite opinion of the Commissioner and an opportunity of hearing to the taxable person, were required to be satisfied. The impugned order does not demonstrate comp[ance with those statutory requirements. xii) That the refund application dated 2g.l).2O2S was hled within the prescribed period of limitation from the relevant date, the Department itself having recorcled in the RFD_O6
t2 that, in the case of a refund arising as a consequence of an appellate order, communit:ation of the relevant date is the date of such order and that the enrichment. Further, the Petitioner applicatio n was filed rvithin the Prescribed petitioner's period. The petitioneralsofurnishedtheCA,sCertificateinsupportofits claim that the incidence ol ta-.< had not been passed on to any othor thereby addressing the requirement relating lurnishecl person, unjust the DRC-O3 challans, relevant trlectronic Credit to Ledger zLnd Electronic Cash Ledger extracts and other supportir-rg documents in support of its refund claim' xiii) That the refund proceedings under Section 54 could not be convertel tnto a collalerai proceeding for reconsidering the substan'-ive findings recorded by the competent appellate authority in relation to the admissibility of the ITC' xiv) That thr availability ol an alternatlve slatutory remedy is not an absolute bar to the exercise of juri iction under Article 226oftheConstitution,particularlywheretheimpugned action .rllegedly suffers from juri ictional error' violation of principles ol natural justrce' or failure to exercise juri iction in accot'dance with law' xv) That the present case raises a juri ictional and public-law issue :oncerning the authority of respondent No 7 to 13 disregard the operative Order-in-Appeal and to rely upon the Department's proposed challenge to that order as a ground for refusing the refund. The grievance is not merely against an erroneous appreciation of facts but against the manner in which the refund juri iction has been exercised. Submissions on behalf of the respondents
The learned Standing Counsel appearing for the respondents has advanced Lhe following submissions: i) That the present Writ Petition ought not to be entertained, as the petitioner has an efficacious statutory remedy of appeal under Section 107 of the CGST Act against the impugned order. It is contended thal th'e petitioner cannot bypass the statutory appellate mechanism and directly invoke the writ juri iction of this Court. ii) By placing reliance upon the judgment of the Hon'ble Supreme Court in , ssistant Commissioner of State Tqx & Others a, Commercial Steel Llmiteda, it is contended that ordinarily, a High Court should not entertain a writ petition under Article 226 of the Constitution where an efficacious statutory remedy is available. Al the same time, the Hon'b1e Supreme Court recognized that the existence of an o lzozt; ts scc I
t1 alternative remedy is not an absolute bar to the exercise of writ jurilldiction in exceptional circumstances. iii) That no such exceptional circumstances arise in lhe present case and that the impugned order was passed by the compete:rt authority upon consideration of the petitioner,s refund claim, the documents on record and the circumstances relevant to the determination of refund eligibiliti'. ir) That thr: proceedings for refund under Section 54 of the CGST Act constitute an ..independent statutory process. According to the respondents, the setting aside of the demand by the Order-tn-Appeal does not dispense with the v) statutorJ' requirements governing a clarm for refund, and the petitioner was required to establish its entitlement in accordarLce wilh Section 54 of the CGST Act and the Rules made thereunder. That the Order-in-Appeal merely set aside the demand and did not specifically adjudicate upon the petrtioner's entitlem<:nt to refund or direct sanction of the refund amount. It is therefore submitted that the refund sanction ng authorily was required to examine the refund applicati,ln independenth, and determine u.hether the statutor) requirements for grant of refund had been satisfied.
15 vi) That the Orde r-in-Appeal dated 16.09.2025 is the subject matter of further proceedings, inasmuch as the Department has lrled an appeal before the GSTAT on 25.03.2026. It is contended that in view of the pendency of such proceedings, grant of refund at this stage may result in financial consequences for the Revenue and may give rise to multiplicity of proceedings. vii) That the competent reviewing authority, upon examination of the Order-in-Appea1, formed the view that the said order was not legal and proper and consequently decided to pursue the statutory appellate remedy. On this basis, the respondents contend that the refund claim ought not to be sanctioned during the pendency of the further proceedings viii) That, during the course of processing the relund claim, the proper officer examined the petitioner's financial statements and depreciation schedules and observed that the value of the goods, services and works contract services stated to have been used in the construction of the warehouse buildings appeared to have been capitalized as immovable property in the petitioner's books of account, with depreciation being claimed thereon under the Income Tax Act. ix) That the aforesaid accounting treatment and claim of depreciation constituted a relevant circumstance for i6 examininq thc petitioner's entitlement to refund and that the said aspect had r-rot been examined by the appellate authoritv. It is thcrclore submitted thar the refund sanctioni eg authority was cntitled to examine the petitioner,s refund ciaim with reference to the material available on record, irLcluding the financial statements and clepreciation schedulesi. x) That the impugned order does not amount to sitting in appeal over the Order-in-Appeal and does r-rot violate the principles of judicial discipline. According to the respondents, the refurrd sanctroning authority clid not seek to reoperr the adjudication _of the original demand, but merely examined the petitioner,s claim for refund in accordanrre with thc slatutory requiremenLs of Section 54 of the CGST Act. xi) That the Crder in-Appeal w.as given effect to insolar as the demand ccnfirmed in the adjudicarion procecdings stood set asrde, bur, that the question of refund was required to be separately examined under Section 54 of CGST Act. Since the Order-in-Appeal did not specifically determine the admissibility of the refund claimed by the petitioner, the respondents submit that the proper officer was .lustified in examining the petitioner's entitlement to refund on the basis
17 of the material placed before the refund authority, including the financial statements and depreciation schedules.
We have taken note of the respcctive submissions urged and perused the material on record. Consideration by this Court L7. The first and foremost question that arises for consideration is whether lhe Order-in-Appeal dated 16.09.2025 was operative and binding upon the respondents as on the date of the impugned order dated 12.07.2026, and w-hether respondent No 7 was justified in declining to give effect to the findings recorded therein
In this regard, it is apposite tq reproduce the Section 107(16) of the CGST Act which reads as under: (16) Euery order passed under this section shall, subject to the prouisions of Section 108 or Sectrcn 1 13 or Sectton 1 17 or Section 1 18 be final and bindtng on the Parties. A plain reading of the said provision demonstrates that the statutory scheme makes an order passed by the appellate authority under Section i O7 of the CGST Act binding upon the parties, subject to the specihc statutory remedies contemplated under Sections 1O8, 113, 117 and 118 of the CGST Act. Consequently, merely because a further statutory remedy may be available or \ ,1
contemplated, the appellate ordcr does not cease to operate unless it is modified, stayed, or set aside in accordance with law.
In the present case, the following facts are materral i) The Order in Appcal rvas passed on 16.09.20,25; ii) The impugned order rejecting the petitioner,s refund claim was passed on 12.O j..2026: 18 iii) As on 12.0L.2026, rherc was no order passed under Section 108, nor r,,r,a s there any order of the GSTAT, High Court or Hon,ble Supreme Court modifying, staying or setling aside the Orclcr.in Appeall and iv) The De partment's appeai before the GSTAT was fiIed only subsequently, on 25.03.2026. The filing oI such appeal is recorded in the proceedings before this Court. In thesr: circumsLances, the Order_in_Appeal dated 16.09.2025 remaincd operative and binding upon the parties as on 12.O1.2026. 'lhe subsequent filing of an appeal before the GSTAT, does not retrosl)ectively render the Order-in-Appeal inoperative as on the date when the impugnecl order was passed. In the absence of any Appeal, 20. order s laying, modifying or setting aside the Order-in_ the res':ondents were required to give due effect to the appellate decision in accordance u,ith law It is pertinent to note that the observation contained in para 1 1.4 of the imfrugnecl order that the Order_in-Appeal ,,has not t9 attained the finolity " cannot, therefore, justify the rejection of the petitioner's refund claim. Even assuming that the Department was entitled to pursue the statutory remedy against the Order-in- Appeal, the mere decision to challenge the appellate order, or the subsequent liling of an appeal, did not amount to a stay or suspension of the operation of the Order in-Appeal. The said para 1 1 .4 is extracled hereunder for readv reference:
4 In the instant case the amounts utere paid by the taxpager uoluntailg, duing the inuestigation. Hence, the rqtio laid doun in the said cc.se lauts is not applicable to the present case The present Order in Appeal has not attanned the finalitA tnasmuch as the competent authoitA has reuiewed Che same, found it not legal and proper and dectded to file an appeal before Hon'bLe GSTAT- Further, the Case Laus cited bA the taxpaAer dunng the personal heaing pertain to the appeols against refund sanction order. Appellate orders against refund sanction are treated qs orders u/s 5a$) of the CGST Act, 2017. While the present order of appellqte authoitA is-against the confirmed demand of ir-rerylar ITC 2L. The respondent No.7, while processing the petitioner's refund claim, has effectively reopened and disregarded findings which had already been adjudicated upon by the appellate authority, which are evident from the lollowing: i) The respondent No.7 relied upon the fact that the "competent authority has reuieu.ted the same, found it not legal and proper and. decided to Jlle on appeal before the Hon'ble GSTAT". Such an internal review or administrative decision to challenge the Order-in-Appeal could not have the effect of nullifying, suspending or rendering inoperative the appellate Ir
20 order. The correctness of the Order-in_Appeal could be challeng<:d only in accor.dance r.vith the statutory remedies provided under the CGST Act and could not be re_examined by the relund sanctioning aulhority while processing the conseque ntial rcfund claim. ii) The respondent No.7 further relied upon the ,,Depreciotion Schedule" and the allegecl capitalization of the warehouse_ related e>rpenditure as ,,Building,, in the petitioner,s books of account. The impugncd order proceeds on the premise that this material had not been placed before or considered by the appellate authority. The peritioner submits that even assuming that such maLerial was available for consideration, the refund sernctioning 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 respo;tdents considered that the appellate determination required reconsideration in thc light of any additional material, the remedy lay in pursuing the statutory appellate / revi sional mechanism and not in disregarding the operative appellate order at the stage of processing the refund iii) The respondent No.7 further declined to sanction the refund on the ground that the refund claim was premature and that zt the Order-in-Appeal had "not attained the finality". As submitted hereinabove, the Order-in-Appeal remained and had not been stayed, on 12.O1.2026 set aside by any competent forum. The filing of the Department's appeal before the GSTAT oi 25.03.2026 could not retrospectively affect the legal posrtion prevarling on the date of the impugned order.
The aforesaid course of action is contrary to the principle of judicial discipline. A subordinate or implementing authority cannot, while exercising a distinct statutory function, disregard the operative hndrngs of a superior appellate authority merely because the Department considers those- findings to be incorrect or proposes to challenge them. The statutory remedy of appeal is available to the Department precisely for the purpose of challenging an appellate order. Until such order is modiflted, stayed or set aside by the competent forum, the subordinate authoritres are required to give effect to the operative order in accordance with law.
The Hon'ble Supreme Court in Union of India tt. Kamalakshi Finance Corporqtion Ltd.s, emphasized the importance of judicial discipline and held, in substance, that the orders of higher appellate auLhorities are binding upon subordinate operative as modified or subsequent 5 1992 Supp (1) scc 443
22 authorities ar.d cannot be disregarded merely because the Department considers them erroneous. The Apex Court also recognized that the Department has its statutory remedies for challenging an order and cannot, pending such challenge, permit subordinate authorities to act contrary to the binding decision.
Likewise, ln M/s God.rej Sara Lee Ltd. u. Excise and. Tqxation OfJicer-cum-Assessing Authoritg & other*, the Hon'ble Suprerne Court held thaL .Once the issue stand_s Jinally concluded, tlrc decision binds the State, a fortiori, the Reuisional Authoitg. I'he decision of the Tibunal may not be accelttoble to the Reuisional AutlLoritg, but that cannot furnish ang ground_ to such authoitg to perceiue that it is either not bound bg the same or that it need not be follou,ted. "
In the present case, respondent No.7 has no power to reopen, indirectly questioning or refusing to give effecl to the substantive finclings of the operative Order-rn_Appeal on the very issue which forrned the basis of the demand. The impugned order, to the extent that it proceeds on such an approach, is contrary to the principles of judicial discipline and the statutory scheme governing appellate orders, and is liable to be set aside.
The petitioner submits that the refund claimed by it constitutes consrequential relicf flor,",ing from the Order_in_Appeal 6 (2025) 11 scc 808
The relief sought by the petitioner in the appeal before the appellate authority was for setting aside the Order-in-Original, together with all consequential reliefs and the appellate authority, having considered the matter, allowed the appeal in its entirety and set aside the Order-in-Original. Consequently, the demand of Rs. 19,33,34.320 I - confirmed therein ceased to have any legal effect and the amounts paid by the petitioner towards the said demand could not thereafter continue to be retained by the respondents, merely on the basis of a demand which had been set aside. The setting aside of the demand thus gave rise to the petitioner's claim for consequential refund of the amounts paid and appropriated towards the said demand, subject to the statutory procedure prescribed under Section 54 ot the CGST Act" The fact that the Order-in-Appeal did not separately direct payment of refund does not alter the nature of the relief claimed, since the refund arises as a consequence of the demand itself having been set aside by the appellate authority.
The observation of respondent No.7 in paragraph 11.6 of the impugned order that the Order-in-Appeal "does not direct refund nor od.judicate refund eligibility under Section 54" is misplaced. The absence of an express direction to grant refund in the Order-in- Appeal does not extinguish lhe petitioner's right to seek consequential refund. The appellate authority allowed the appeal in its entirety and set aside the Order-in-Original; the petitioner
24 thereafter invcked lhc statutory refund mechanism under Section 54 for obtainirLg the consequential monetary relief arising lrom the appellate decision. Thus, thc question before the refund authority was whether trre petitioner satisfiecl rhe statutory requirernents for processing the consequenrial rcfuncl claim, and not rvhether the substantive derand which had already been ser aside could be re_ adjudicated. 2fi. I t is to b : noted l_hat under Section 54 of the CCiST Act, the scheme itself recognizes refund claims arising as a consequence of appellate orders. Section 54(1), read with the Explanation thereto, prescribes the period within rvhich an application for refund rs required to be made and specifically recognizes, for purposes of determining th e re.levant date, cases where the tax becomes refundable as a consequence of an order of an appellate authority. The Departmen t itse lf, in the impugned order, has treated the date of communrcati,rn of the appeuate order as the rerevant date for the petitioner's conr;equential refund claim and has recorded that the application dated 28. lO.2O2S u,as filed within the prescribed period. Therefo;-e, the respon<icnt No.7 could not construe the order-in-Appeal narrowly on the ground that it did not contain an express direction for refund.
Further, tlte sefting aside of thc demar_rd consritured the legal basis for the pe titioner,s consequential refund claim, which was o< thereafter required to be processed in accordance with Section 54 of the CGST Act. Thus, the refund application was not an independent attempt to reopen the substantive dispute relating to the demand, but a statutory claim for consequential relief arising fro m Lhe Order'in-Appeal.
The petitioner's submissron that respondent No.7 ought to have invoked the specific power under Section 54(11) of the CGST Act, if the respondents intended to withhold the refund, is well- founded. Section 5a(11) of the CGST Act provides a specific statutory mechanism for withholding a refund where the order giving rise lo such relund is the subject matter of an appeal or further proceeding, or where any other proceedings under the Act are pending, subject to the conditions stipulated therein. The said provision reads as under: (1 1l Where qn order giving nse to a refund is the subJect mqtter of on appeaL or further proceedings or where any other proceedings under this Act is pending (1nd the Commissroner is of the opinion thot grant of such refund is likelg to aduerselg affect the reuenue tn the said appeal or other proceedings on accounL oJ malfeasance or fraud committed, he maA, after giutng the taxable person an opportunitA oJ berng heard. wrthhold the refund till such time as he maA determine.
It is to be noted that Section 54(11) contemplates, inter alia, that if the order giving rise to the relund is the subject matter of an appeal or lurther proceeding, or lhaL other proceedings under the Act are pending; and the Commissioner is of the opinion that grant
26 of the refund ir; likely to adversely aflect the revcnue in such appeal or proceedings on accounr ol malfeasance or fraud; an opportunity of being heard has to be aflorded ro the person concerned. before the refund is r,"ithheld.
In the present case, the statutory requirements under Section 54 ( 1 1) were not satisfiecl as on the date of the impugned order dated 12.O1.2026, for the following reasons: i) No appezrl was pending against the Order in-Appeal as on 12.Ol.2O26. The respondcnts admittedllr filed an appeal before thr: GSTAT only on 25:.m.2026, i.e., subsequent to the passing of the rmpugned order. ii) The impr-.gned order does no1 record any finding or opinion of the Ccmmissioner that grant of the refund was likely to adversely affect the revenue on account of any malfeasance or fraud cn the part of the petitioner. iii) The petirioner was not afforded an opportunity of being 33. heard befrrre the refund was withheld on the ground that the Order-in-t\ppeal was under review or was proposed to be challengerl. The respo ndents could no t circumvent the specific statutory mechanism under Section 54( i 1) by rejecting the refund application und*r section 54(g) on the ground that the order-in- Appeal had bee,n subjected to review or that the Department
n'7 proposed to pursue further proceedings lf lhe respondents intended to withhold the refund pending further proceedings, they were required to fulfilI the statutory requirements of Section 54(11), including recording of the requisite opinion contemplated therein and affording the petitioner an opportunity of being heard before withholding the refund' However, no such exercise was undertaken in the Present case. g4. Moreover, the action ol respondent No'7 in rejecting the refund application under Section 54(8) merely on the ground that the Order-in-Appeal was under review is untenable" The mere fact that the Department subsequently preferred an appeal before the GSTAT could not retrospectively validate the impugned order dated 12.01.2026. In the absence of a pending appeal or other proceeding as on the date of the impugned order, and in the absence of compllance with the s[atutory requ.irements of Section 54(t 1), the respondents could not withhold the refund by treating the Order-in Appeal as incapable of being given effect to' 35.Therespondents'contentionthatthepresentWritPetitionis not maintainable in view of the availability of an alternative remedy under Section 107 of the CGST Act is misconceived 36.Itiswell-settledthattheavailabilityofanalternativeremedy is not an absolute bar to lhe exercise of juri iction under Article 226 of the Constitution The High Court may exercise its writ na, ,,,
28 juri iction, in_ter alia, where the impugned order is pa ssed without or in excess cf juri icrion, in breach of the principles of natural justice, is marLilestly arbitrary or perverse, or where the alternative remedy is not efficacious in the facts and circumstances of the case. The presient case falls within the rule of alternat ive remedy. recognized exceptions to the 37. The impugned order suffers from, fundamental ir.fi rmities: inter alia, the following i) Lack of juri iction: The Refund Authority, rvhile processing the refund claim under Section 54, could no[ reopen or disregard the substantive findings rendered by the appellate authoritv in the Order_in _A pp,eal. ii) Failure tr> independently apply mind: The impugned order itself recrords that the refund processing officer had communi,rated with the Revicw Section and that the comperen r authority had opined that the refund could not be granted irr view of the proposed challenge to the Order_in_ Appeal. The decision-making process was thus materially influenceci by the Review Sr:c tion, rather than being confined to an ind:pendcnt consideration of the petitioner,s refund claim and its reply. iii) Arbitrariness and legal infirmity: 1.he impugned order rejects the petitio:-rer,s refund claim on the basis that the Order-in_
29 Appeal had not attained finality and that the Department proposed to challenge the same, wilhout demonstrating any statutory basis for withholding the refund on such ground. The impugned order also seeks to rely upon issues concerning capitalization and depreciation which, as pleaded by the respondents lhemselves, were being relied upon to question the petitioner's substantrve entitlement to ITC, notwithstanding the setting aside of the underlying demand by the appellate authoritY. 38, ln M/s, Godrej Sara Lee ltd'(supra 5), the Hon'ble Supreme Court reiterated that although the existence of an alternative remedy is a relevant consideration in the exercise of writ juri iction, it does not operale as an absolute bar- The juri iction under Article 226 of the Constitution may be exercised in appropriate cases, including where the proceedings are instituted without juri rction, there is a violation of the principles of natural justice, or the vires of legislation are under challenge. gg. It is also to be noted that the alternative remedy of filing an appeal against the impugned order would not constitute an efhcacious remedy in thc lacts of thc present case. The appeal would lie belore the Additional Commissioner-I, who is subordinate to the Principal Commissioner. the competent authority who had already expressed its opinion against grant of the refund and had !,
30 directed thar rhe Order-in-Appcal be challengcd. ,lhus, relegating the petitioner to an appella le remedy before an authority subordinate to the very authorny which has already formed and expressed its vicrn on the subiect would render the alternative remedy ineffec:ive and illusory. 40. 'lhe pe ti :ioner, therefore, ought not to be relegated to such alternative relnedy, particuiarlv u,hen rhe impugnc-d order is challenged on grounds of juri iction, non_application of mind and failure to comply with the statutory mechanism under Section 54(l 1l oi r hc C,IST Acr
Conclusion 4L. For the :oregoing reasons, this Court is of the considered view that the i rrpugned order dated 12.01,.2026 rs unsustainable in law, having rejected the petitioner,s consequential refund claim on the basis of a proposcd departmental appeal, wrthout complying with the statutcry mechanism under Section 54(11) of the CGST Act. The impullned order is, therefore, liable to be set aside, with consequential directions for granL of the refund in accordance with law
Accordingly, the following directi,)ns: Writ I)etition is disposed of. with rhe
31 i) The impugned order dated 12.0L.2026 in Form GST-RFD-06 bearing ARN No. AA361O25O43O86J, passed by respondent No.7, is hereby quashed and set aside. ii) The matter is remanded to respondent No.7 for fresh consideration and disposal of the petitioner's refund application in Form GST-RFD-O1 dated 28. i0.2025, ln accordance with law. iii) If the respondents seek to withhold the refund on the ground of any pending or further proceedings, they sha11 act strictly . in accordance with the provisions of Section 54(11) of the CGST Act, including satisfaction of the statutory conditions prescribed therein and compliance with the requirement of affording an opportunity of hearing. iv) Respondent No. 7 shall pass a fresh, reasoned and speakrng order on the petitioner's refund application within a period of four (4) weeks from the date of receipt of a copy of this judgment. As a sequel, miscellaneous petitrons, pending if any, stand closed. No costs. M. OSMAN ALI BAIG ASSISTANT REGIST //// SECTION OFFICER
The Secretary, Ministry of Finance, The Union of lndia, Department of Revenue, New Delhi-1 '10001 .
Commissioner of Customs and Central Tax (Appeals-l), Hyderabad GST Commissionerate GST Bhavan, L.B. Stadium, Basherbagh, Hyderabad- 500004. 3. Additional Commissioner, Ranga Reddy GST Commissionerate, GST Bhavan, VIP Hills, Jaihind Enclave, IVIadhapur, Hyderabad- 500081. 4. Additional Director, Directorate General of GST lntelligence (DGGI)' Hyderabad Zonal Unit, Opposite HDFC Bank, Bequmpet, Hvderabad-S0O016' To,
5'AdditionalAss;istantDirector,DirectorateGeneralofGSTlntelligence(DGG.I), - HVJ"rrOrO Zonal Unit, Opposite HDFC Bank Begumpet' Hyderabad-5-00016' O. S6n.r. lntellil;ence Officer, DGGI, Goods and Services Tax lntelligence' - ivJeranro Z:nat Unit, plot No. 212 and 213, Btock-B, Kavuri Hills, Guttala Begumpet, Madhapur, Hyderabad- 500081'
AsJistant C,mmissioner of Central Tax, Madhapur CGST Division, nung"r"OOV CGST Co Commissionerate, 4th Floor' Serene Heights' Humlyun Nia'3ar, Masab Tank, Hyderabad- 500028' 8. one ic to snt KoPAL SHARRAF, Advocate [oPUC] S. On" CC to tMs. BOKARO SAPNA REDDY, SR SC FOR CBIC [OPUC] iO.On" CC tO MIS. DOMINIC FERNANDES, SC FOR GST [OPUC] t i . One CC to SI?l S. SUNIL (Sr SC FOR CENTRAL GOVT) [OPUC] 12.One CC to SRI N. BHUJANGA RAO' Deputy Solicitor General of lndia [OPUC] 1 3. Two CD CoP es BN GJP (v
N HIGH COURT DATED: 0810912026 ORDER WP.No.3663 of 2026 t 1flE SIE 24 SEP M PATCT\ o L,, DISPOSING (f,F THE WRIT PETITION WITHOUT COSTS E * t p ^a} oY' Yx,, \{\ t'
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.