Ms Devi Electronics PVT LTD vs. Commissioner CGST Delhi South And Ors

Facts

The Petitioner, MS DEVI ELECTRONICS PVT LTD, engaged in exporting electronic goods, filed five refund applications totaling Rs. 3,15,30,605.03 for the period November 2023 to January 2024. These were initially rejected by the Original Authority for lacking requisite documents. The Appellate Authority allowed the Petitioner's appeals on June 19, 2024, directing the refund. Subsequently, the Competent Authority reviewed this order and decided to appeal before the GSTAT. In the interim, the Petitioner filed a consolidated refund claim. The Commissioner CGST Delhi South, invoking Section 54(11) of the CGST Act, 2017, passed an order on September 24, 2024, withholding the refund, citing an ongoing Anti-Evasion (AEW) investigation and forming an opinion of fraud or malfeasance. The Petitioner challenged this withholding order before the High Court.

Held

The Court held that the challenge to the Impugned Order could not be sustained. It found that an Anti-Evasion (AEW) investigation was already pending when the Impugned Order was passed on September 24, 2024. The Commissioner had formed the requisite opinion of fraud or malfeasance based on contemporaneous material, which included evidence of non-existent suppliers, lack of goods movement, and fraudulent ITC availment. The Court clarified that the second limb of Section 54(11), concerning pending proceedings and the Commissioner's opinion of fraud or malfeasance, was invoked based on the AEW investigation that commenced by March 26, 2024. The Court also noted that the Petitioner's contention regarding the SCN dated 21.08.2026 was misplaced, as the Impugned Order was based on the ongoing investigation, not solely on that SCN. The Court acknowledged that an appeal against the Impugned Order had already been filed before the GSTAT and therefore, it was not appropriate for the High Court, in writ jurisdiction, to adjudicate disputed questions of fact. The Petitioner was granted liberty to raise all contentions before the GSTAT.

Key Issues

1. Whether the Respondent No.1 (Commissioner CGST) rightly invoked Section 54(11) of the CGST Act, 2017, for withholding the refund sanctioned by the Order-in-Appeal dated 19.06.2024, given that no appeal against the Order-in-Appeal or the Impugned Order was pending before the GSTAT on the date of the Impugned Order? Petitioner's arguments: The Petitioner contended that Section 54(11) could not be invoked as no appeal was pending before the GSTAT on the date of the Impugned Order. The mere contemplation of filing an appeal or an ongoing investigation does not constitute a 'pending proceeding' for the purpose of withholding refund. They relied on cases like Mandy Enterprises v. Deputy Commissioner and Alex Tour Travel v. Asst. Commissioner CGST. The Petitioner also argued that a Show Cause Notice dated 21.08.2026 could not be a basis for withholding the refund as it was issued after the Impugned Order. Revenue's arguments: The Revenue argued that the Impugned Order was justified under the second limb of Section 54(11), which allows withholding refund if there are pending proceedings and the Commissioner is of the opinion that fraud or malfeasance has occurred. The AEW investigation was underway, and the Commissioner formed his opinion based on material indicating non-existent suppliers, lack of goods movement, and fraudulent ITC availment. The Court noted that an appeal against the Impugned Order had been filed before the GSTAT.