Trivitron Healthcare Private LTD vs. Deputy Commissioner Division Vi CGST Central Excise Commissionerate Belapur

Facts

The Petitioner, Trivitron Healthcare Private Ltd., challenged notices and orders issued by the Deputy Commissioner, CGST. An Assessment Order dated 30/8/2022 demanded Rs. 1,12,34,474/- for FYs 2017-18, 2018-19, 2019-20. The Petitioner appealed this order, making a 10% pre-deposit. The First Appellate Authority rejected the appeal. The Petitioner intended to appeal to the GST Appellate Tribunal. A CBIC Circular clarified that recovery is stayed upon pre-deposit. The Petitioner filed a refund application for Rs. 93,76,673/- for July-September 2023. The Respondent rejected part of the refund, determining an eligible refund of Rs. 64,01,750/-, but adjusted the entire amount against the outstanding demand from the earlier assessment years. The Petitioner had paid a further 10% pre-deposit, totaling 20% of the disputed demand, which, according to Section 112(8) and 112(9) of the CGST Act, should have stayed recovery of the balance 80%. A rectification application was rejected, leading to this petition.

Held

The Court held that the Respondent No. 1 was not justified in adjusting the eligible refund of Rs. 64,01,750/- against the alleged outstanding demand for FYs 2017-18, 2018-19, and 2019-20. The Petitioner had made a pre-deposit of 10% at the time of filing the first appeal and a further 10% on 19/08/2025, totaling 20% of the disputed demand. As per Section 112(8) and 112(9) of the CGST Act, 2017, upon payment of 20% of the disputed demand, the recovery of the balance 80% stands stayed. This statutory provision was further reinforced by CBIC Circular No. 224/19/2024-GST dated 11/07/2024, which clarified that recovery remains stayed upon payment of the prescribed pre-deposit. Therefore, it was not open for the Respondent No. 1 to adjust the refund amount towards the alleged outstanding demand. The Court directed that the appropriation already effected shall stand reversed and the sum of Rs. 64,01,750/- be restored to the Petitioner within four weeks. The Court also noted that issues regarding the trade name could be decided by the Tribunal. The appeals before the Tribunal and the Appellate Authority were to be decided on their own merits.

Key Issues

1. Whether the Respondent No. 1 was justified in adjusting the eligible refund of Rs. 64,01,750/- against the alleged outstanding demand for FYs 2017-18, 2018-19, and 2019-20, despite the Petitioner having paid the entire 20% pre-deposit as contemplated under Section 112(8) and 112(9) of the CGST Act, 2017, and in light of CBIC Circular No. 224/19/2024-GST? Petitioner's arguments: The Petitioner contended that having paid the entire 20% pre-deposit, the recovery of the balance 80% of the demand was stayed by operation of law under Section 112(8) and 112(9) of the CGST Act, 2017. Therefore, the adjustment of the refund against such a demand was without jurisdiction and contrary to the statutory provisions and the CBIC Circular. The rejection of the rectification application without assigning reasons was also challenged. Respondent's arguments: The Respondent argued that the Petition should be dismissed as the Respondent No. 1 had rejected the rectification application because there were outstanding demands for FYs 2017-18, 2018-19, and 2019-20, which were recoverable by invoking Section 54 of the CGST/MGST Act. They submitted that such an adjustment could not be considered contrary to law. The Respondent also raised a preliminary issue regarding the trade name of the Petitioner.