Facts of the Case

The petitioner, Grapes Digital Pvt. Ltd., provides digital media and advertisement management services, importing services from overseas entities and exporting services abroad — a zero-rated supply under the Integrated Goods and Services Tax Act, 2017. For July 2017 to March 2018, it initially exported under a Letter of Undertaking without paying IGST, but later amended its invoices to reflect exports made after payment of IGST, depositing IGST on RCM for input supplies in August 2018 and using the resultant ITC to pay IGST on exports. On 28 August 2018 it claimed a refund of ₹24,33,20,306. An Order-in-Original dated 24.10.2018 sanctioned the refund but adjusted ₹5,08,03,767 towards interest on delayed RCM and IGST payments, disbursing ₹19,25,16,539. The Appellate Authority (Order-in-Appeal dated 30.04.2019) upheld the refund's admissibility and the interest adjustment on merits but remanded on a limited procedural ground, leading to a fresh Order-in-Original dated 08.08.2019 reaffirming the adjustment. The Principal Commissioner then passed a Review Order dated 16.10.2019 directing an appeal against both Orders-in-Original, contending the entire refund was wrongly sanctioned. A common Order-in-Appeal dated 14.10.2020 allowed the Revenue's appeal and rejected the petitioner's, prompting this writ petition before the Delhi High Court, the GST Appellate Tribunal not yet being constituted.

Issues Involved

  1. Whether the Revenue's appeal against the Order-in-Original dated 24.10.2018 was filed within the six-month limitation under Section 107(2) of the CGST Act.
  2. Whether that Order-in-Original had merged with the earlier Order-in-Appeal dated 30.04.2019, rendering the Revenue's later appeal not maintainable.
  3. Whether adjustment of interest liability against the refund required a separate show-cause notice under Section 73.
  4. Whether interest under Section 50 was payable on delayed RCM/IGST payments despite the petitioner's claim of revenue neutrality.
  5. Whether denial of the refund in entirety was sustainable.

Petitioner's Arguments

  • Argued the refund question had attained finality in its favour and could not be reopened by a belated review and appeal filed beyond Section 107(2)'s six-month period, especially once merged with the Order-in-Appeal dated 30.04.2019.
  • Contended no interest adjustment could be made without a prior Section 73 show-cause notice.
  • Submitted the transactions were revenue neutral, so delayed GST payment caused no prejudice and interest was not chargeable.
  • Argued outright refund denial was erroneous.

Respondent's Arguments

  • Contended the appeal against the 24.10.2018 order was timely, as the Review Branch received it only on 24.09.2019 due to intra-departmental delay.
  • Argued the petitioner, having exported under LOU without IGST, could not later change its option to claim IGST refund on the same exports.
  • Submitted the correct recourse was refund of unutilised ITC accumulated on RCM payments, not IGST on exports.
  • Relied on Sections 50(1), 75(12) and 79(1)(a) to justify recovering interest on admitted tax without a Section 73 notice.

Court Order/Findings

  • Held 'communication of the order' under Section 107(2), for intra-departmental purposes, means the date of issue, since no statute obliges the Adjudicating Authority to communicate orders to the Reviewing Authority; the Revenue's appeal against the 24.10.2018 order was time-barred.
  • Found the 24.10.2018 order had merged with the Order-in-Appeal dated 30.04.2019, which had attained finality as the Revenue never challenged it, making its later appeal not maintainable to that extent.
  • Held no separate Section 73 notice was needed to adjust interest on self-assessed, undisputed tax under Section 75(12) read with Section 79(1)(a).
  • Rejected revenue neutrality as a defence, holding GST and interest are statutory exactions; upheld the ₹5,08,03,767/- interest liability.
  • Set aside the 14.10.2020 order to the extent it denied the refund in entirety, since Revenue could not deny IGST was payable while resisting refund of the IGST actually paid.
  • Directed the refund under the 08.08.2019 order be disbursed with applicable interest; the challenge to the ₹5,08,03,767/- interest adjustment was rejected.

Important Clarification

For Section 107(2) limitation on a departmental review appeal, 'communication of the order' in the intra-departmental context means the date of issue, not receipt by the Reviewing Authority; internal communication delays cannot extend limitation. Interest on self-assessed or admitted tax under Section 50, recoverable via Section 75(12) and Section 79, does not require a fresh Section 73 notice once the taxpayer has had a fair opportunity to contest the quantum.

Sections Involved

  • Section 107 of the CGST Act, 2017 – limitation for departmental review appeals.
  • Section 73 of the CGST Act, 2017 – show-cause notice for unpaid/short-paid tax.
  • Section 50 of the CGST Act, 2017 – interest on delayed payment of tax.
  • Section 75(12) and Section 79(1)(a) of the CGST Act, 2017 – recovery of self-assessed tax/interest.
  • Section 16 of the IGST Act, 2017 – zero-rated supply and refund options.

Decision – In Favour of

The decision is substantially in favour of the Assessee, since the Revenue's appeal was held time-barred, the merger doctrine applied against the Revenue, and the refund denied in entirety was restored with interest. It remains mixed, though, as the Court upheld the Department's interest demand of ₹5,08,03,767/-, rejecting the revenue-neutrality plea.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case No.: W.P.(C) No.2918/2021
  • CNR: Not available
  • Coram: Justice Vibhu Bakhru and Justice Amit Mahajan
  • Decision Date: 5 December 2023
  • Disposal Nature: Writ petition decided on merits (IGST refund/interest adjustment dispute)

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