Facts of the Case

The petitioner, M/s Ganesh Steel (India), represented by Mr. Pradhuman Garg, Advocate, filed CWP-11082-2023 under Articles 226/227 of the Constitution before the High Court of Punjab and Haryana at Chandigarh against the State of Punjab and others, represented by Mr. Arjun Sheoran, DAG, Punjab, seeking to quash an order dated 28.04.2023 by which the State Tax Officer declined to refund Rs.8,80,992/- on the ground that the Department was "in the process of filing an appeal" against the appellate order. The Deputy Commissioner of State Tax (Appeal), Patiala Division, had earlier allowed the petitioner's appeal on 12.07.2022/19.09.2022 under Section 107 of the Punjab GST Act/Central GST Act, 2017 read with Section 20 of the Integrated GST Act, 2017, setting aside a tax penalty and fine of Rs.8,80,992/- levied under Section 130 of the Act by order dated 05.09.2019. Despite the appellate order never being challenged and more than a year having elapsed, the State withheld the refund; the writ petition, first heard on 03.07.2023, saw the State repeatedly given chances (21.07.2023, 29.09.2023) to confirm whether an appeal had actually been filed - it never was.

Issues Involved

  1. Whether the Department can withhold refund of an amount due under an unappealed, final appellate order merely on the ground that it is "in the process of filing an appeal."
  2. Whether the petitioner is entitled to a refund of Rs.8,80,992/-, the penalty and fine earlier set aside in appeal.

Petitioner's Arguments

  • The petitioner contended that the appellate order dated 12.07.2022/19.09.2022 setting aside the tax penalty and fine had never been challenged by the Department and had attained finality.
  • The petitioner argued that withholding the refund merely on the unsubstantiated claim of an intended future appeal, without any appeal actually being filed even after 1 year 4 months, amounted to unlawfully divesting him of the fruits of successful litigation.

Respondent's Arguments

  • The State's position, as reflected in the impugned order, was that the refund should be declined because the Department was "in the process of filing an appeal" against the appellate order dated 12.07.2022/19.09.2022.
  • Despite being granted repeated opportunities across three hearings to confirm whether such an appeal had actually been filed, the State was unable to show that any appeal had in fact been filed.

Court Order/Findings

  • The Bench found that the State was merely "dilly-delaying" the issue, and that an unsubstantiated intention to appeal - never acted upon despite ample opportunity - could not justify withholding a refund that had legitimately accrued to the petitioner.
  • The Court held that the State was not justified in divesting the petitioner of the fruits of litigation merely on the ground that it was contemplating an appeal, especially where more than a year had elapsed without the appeal being filed.
  • Operative direction: the order dated 28.04.2023 declining refund was quashed, and the State was directed to refund Rs.8,80,992/- within two weeks of receipt of the certified copy of the order.
  • Liberty reserved: the Court clarified that if any order is later passed in the State's favour in further proceedings, the refund direction would not stand in the way of recovering the refunded amount.

Important Clarification

  • A tax department cannot withhold a refund flowing from an unappealed, final appellate order simply by asserting an intention to file an appeal; the intention must be substantiated by an actual appeal filed within a reasonable time.
  • Refunds directed in such circumstances are made without prejudice to the Department's right to recover the amount later if it succeeds in a properly filed appeal.

Sections Involved

  • Section 130, Punjab Goods and Services Tax Act, 2017 - provision for confiscation of goods/conveyances and levy of penalty and fine, under which the original penalty and fine were imposed.
  • Section 107, Punjab GST Act/Central GST Act, 2017 - appellate remedy against orders of the adjudicating authority, under which the penalty and fine were set aside.
  • Section 20, Integrated Goods and Services Tax Act, 2017 - applies CGST Act provisions, including appeal and refund provisions, to IGST matters.

Decision – In Favour of

Assessee - the writ petition was allowed and the State was directed to refund Rs.8,80,992/- within two weeks, subject to the liberty that any future order in the State's favour would not bar recovery of the refunded amount.

Related Case Laws

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

Case Details

  • Court: High Court of Punjab and Haryana at Chandigarh
  • Case No.: CWP-11082-2023
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice G.S. Sandhawalia and Hon'ble Ms. Justice Harpreet Kaur Jeewan
  • Decision Date: 31.10.2023
  • Disposal Nature: Allowed; State directed to refund the tax penalty/fine amount within 2 weeks

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