2025 (5) TMI 1972 - HC - GST

Refund claim - Appeal filed by the petitioner before 1st respondent - Appellate Authority was dismissed on the sole ground that the 1st respondent - Joint Commissioner was of the same cadre/rank as of the 2nd respondent - HELD THAT - A perusal of the material on record would indicate that in his first order dated 15.05.2024 the 3rd respondent had come to the conclusion that the petitioner was entitled the sanction of refund and had forwarded the same to the 2nd respondent for prior approval. So also pursuant to the 2nd respondent addressing a communication dated 13.05.2024 the 3rd respondent took into account the reply submitted by petitioner and once again came to the conclusion vide order dated 11.06.2024 that the petitioner was entitled to sanction of refund. Under these circumstances merely because the 2nd respondent had issued a communication dated 17.08.2024 raising the very same discrepancies which he had raised in his earlier letter dated 13.05.2024 the said communication could not have been made basis or relied upon by the 3rd respondent in rejecting refund claim of the petitioner which is erroneous and the same deserves to be set aside. It is relevant to state that however in the appeal filed by the petitioner before the 1st respondent - Appellate Authority the sole reason for the 1st respondent - Appellate Authority to uphold the rejection order of the Assistant Commissioner was by coming to the conclusion that the 1st respondent was in the same cadre/rank as that of the 2nd respondent - Joint Commissioner. However the 1st respondent failed to consider and appreciate that in so far as orders passed by the 3rd respondent - Assistant Commissioner are concerned the 1st respondent - Joint Commissioner functions or act as an Appellate Authority who would be entitled to reconsider re-appreciate and revisit the appeal filed by petitioner on merits without being influenced by any observation/finding recorded by the 2nd respondent and mere similarity or commonality in the rank / cadre between 1st and 2nd respondent could not have been made the basis to summarily reject the appeal filed by petitioner especially when the 2nd respondent was functioning or acting in his administrative capacity while the 1st respondent was functioning or acting as an Appellate Authority against the orders passed by the 3rd respondent. Conclusion - Merely because the 2nd respondent had issued a communication dated 17.08.2024 raising the very same discrepancies which he had raised in his earlier letter dated 13.05.2024 the said communication could not have been made basis or relied upon by the 3rd respondent in rejecting refund claim of the petitioner which is erroneous and the same deserves to be set aside. It is deemed just and appropriate to set aside the impugned order at Annexure-A passed by 1st respondent and remit the matter back to the 1st respondent for reconsideration afresh in accordance with law and by issuing certain directions in this regard - petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned Order-In-Appeal dated 31.12.2024 passed by the Appellate Authority (Respondent No.1) is liable to be quashed for erroneously dismissing the petitioner's appeal against refund rejection.

- Whether the Refund Rejection Order dated 19.08.2024 passed by the Assistant Commissioner (Respondent No. 3) rejecting the refund claim is sustainable given the prior sanction orders in favour of the petitioner.

- Whether the 2nd respondent-Joint Commissioner's repeated communication raising identical discrepancies, already addressed and answered in favour of the petitioner, could be validly relied upon to reject the refund claim.

- Whether the Appellate Authority erred in dismissing the appeal on the ground that it was of the same cadre/rank as the Joint Commissioner who raised the discrepancies, thereby failing to exercise independent quasi-judicial authority.

- Whether the petitioner is entitled to the refund amount of Rs. 22,32,37,425/- along with interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Refund Rejection Order dated 19.08.2024 by Assistant Commissioner

Relevant legal framework and precedents: The refund claim process under GST law requires sanction by the Assistant Commissioner and prior approval by the Joint Commissioner. The authorities must consider the merits and discrepancies raised, allowing the petitioner to respond before rejecting claims.

Court's interpretation and reasoning: The Court noted that the Assistant Commissioner initially sanctioned the refund on 15.04.2024 and again on 11.06.2024 after considering the petitioner's detailed reply to the show cause notice. The Joint Commissioner had raised six discrepancies on 13.05.2024, but these were answered satisfactorily by the petitioner and accepted by the Assistant Commissioner.

Key evidence and findings: The Assistant Commissioner's two orders in favour of the petitioner and the petitioner's detailed reply dated 05.06.2024 were critical evidence. The Joint Commissioner's repeated communication dated 17.08.2024 raised the same discrepancies without new justification.

Application of law to facts: The Assistant Commissioner's rejection of the refund based solely on the reiterated communication from the Joint Commissioner, without fresh grounds or re-examination of the petitioner's responses, was held to be erroneous.

Treatment of competing arguments: The respondents argued in support of the rejection, but the Court found the rejection order inconsistent with the Assistant Commissioner's earlier sanction orders and the petitioner's replies.

Conclusions: The Refund Rejection Order dated 19.08.2024 was unsustainable and deserved to be set aside.

Issue 2: Legitimacy of the Appellate Authority's Order dated 31.12.2024 dismissing the appeal

Relevant legal framework and precedents: The Appellate Authority under GST law has quasi-judicial powers to independently reconsider and decide appeals against orders passed by subordinate officers. The authority must exercise independent judgment and cannot be bound by administrative communications or rank equivalence.

Court's interpretation and reasoning: The Court observed that the Appellate Authority dismissed the appeal solely on the ground that it was of the same cadre/rank as the Joint Commissioner who raised the discrepancies. The Court held this reasoning to be flawed because the Appellate Authority acts in a judicial/quasi-judicial capacity and must re-appreciate the merits of the case independently.

Key evidence and findings: The order of dismissal did not consider the substantive merits or the petitioner's responses to discrepancies but rested on rank equivalence, which is irrelevant to the appellate function.

Application of law to facts: The Appellate Authority erred in law by refusing to exercise its appellate jurisdiction on the merits, relying instead on a non-legal ground.

Treatment of competing arguments: The respondents defended the impugned order, but the Court rejected the argument that rank equivalence justified dismissal.

Conclusions: The impugned order of the Appellate Authority was set aside, and the appeal was restored for fresh consideration.

Issue 3: Effect of repeated discrepancies raised by the Joint Commissioner

Relevant legal framework and precedents: Administrative communications raising discrepancies must be considered in light of the petitioner's replies and the sanctioning authority's orders. Repetition of identical objections without fresh grounds cannot justify rejection.

Court's interpretation and reasoning: The Court found that the Joint Commissioner's communication dated 17.08.2024 merely reiterated the same six discrepancies raised earlier on 13.05.2024, which had been addressed and answered in favour of the petitioner.

Key evidence and findings: The two communications from the Joint Commissioner and the Assistant Commissioner's orders sanctioning the refund despite these communications.

Application of law to facts: The Assistant Commissioner's reliance on the repeated communication to reject the refund was erroneous as no new material or grounds were presented.

Treatment of competing arguments: The respondents' reliance on the repeated discrepancies was rejected by the Court as legally unsustainable.

Conclusions: The repeated discrepancies could not be the basis for rejecting the refund claim.

Issue 4: Entitlement to refund and interest

Relevant legal framework and precedents: Under GST law, a taxpayer is entitled to refund if the claim is substantiated and no valid discrepancies remain unresolved. Interest is payable on delayed refunds as per statutory provisions.

Court's interpretation and reasoning: Since the Assistant Commissioner had twice sanctioned the refund and the discrepancies were answered in favour of the petitioner, the petitioner was prima facie entitled to the refund amount along with interest.

Key evidence and findings: The sanction orders dated 15.04.2024 and 11.06.2024, the petitioner's detailed replies, and the absence of valid grounds for rejection.

Application of law to facts: The petitioner's entitlement to refund and interest was established, subject to final decision by the Appellate Authority upon reconsideration.

Treatment of competing arguments: The respondents' opposition was based on procedural grounds and repeated discrepancies, which were rejected.

Conclusions: The petitioner is entitled to the refund amount of Rs. 22,32,37,425/- along with interest, subject to final adjudication.

3. SIGNIFICANT HOLDINGS

- "Merely because the 2nd respondent had issued a communication dated 17.08.2024 raising the very same discrepancies which he had raised in his earlier letter dated 13.05.2024, the said communication could not have been made basis or relied upon by the 3rd respondent in rejecting refund claim of the petitioner which is erroneous and the same deserves to be set aside."

- "The 1st respondent - Joint Commissioner functions or act as an Appellate Authority who would be entitled to reconsider, re-appreciate and revisit the appeal filed by petitioner on merits without being influenced by any observation/finding recorded by the 2nd respondent and mere similarity or commonality in the rank / cadre between 1st and 2nd respondent could not have been made the basis to summarily reject the appeal filed by petitioner."

- The impugned order of the Appellate Authority dismissing the appeal solely on the ground of rank equivalence is set aside, and the appeal is restored for fresh consideration.

- The Assistant Commissioner's rejection of the refund claim based on reiterated discrepancies without fresh grounds is quashed.

- The matter is remitted to the Appellate Authority for independent reconsideration and disposal within three months, with liberty to the petitioner to submit additional pleadings and documents.