Facts of the Case

The petitioner, M/s Ganesh Steel (India), sought a refund of Rs.8,80,992/- after succeeding before the Deputy Commissioner of State Tax (Appeal), Patiala Division, who had allowed its appeal under Section 107 of the Punjab GST Act against an earlier order imposing tax, penalty and fine under Section 130 for the same amount. Despite the appellate order dated 12.07.2022/19.09.2022 attaining finality without challenge, the State Tax Officer, by order dated 28.04.2023, declined to refund the amount on the ground that the department was "in the process of filing an appeal" against the appellate order.

Issues Involved

  1. Whether a refund arising from a final, unchallenged appellate order can be withheld merely because the department claims it is "in the process of" filing a further appeal.
  2. What is the appropriate remedy where the State delays indefinitely in actually filing such an appeal?

Petitioner's Arguments

  • The petitioner argued that the appellate order allowing its appeal had never actually been challenged, that over a year had elapsed since the order, and that withholding the refund merely on the department's unsubstantiated claim of an intended appeal deprived the petitioner of the fruits of its successful litigation.

Respondent's Arguments

  • The State, when repeatedly asked by the Court over multiple hearings (03.07.2023, 21.07.2023, and 29.09.2023) whether an appeal had actually been filed against the appellate order, was unable to confirm that any such appeal had in fact been filed.

Court Order / Findings

  • The Court found that despite the writ petition remaining pending for several hearings specifically to allow the State to clarify whether an appeal had been filed, no appeal had actually been filed even after more than a year had elapsed since the appellate order, showing that the State was "only dilly-dallying" on the issue, and that it would not be justified in divesting the petitioner of the fruits of litigation that had accrued to it.
  • The order dated 28.04.2023 declining refund was quashed, and the State was directed to refund the amount due within two weeks of receipt of the certified copy of the order.
  • The Court clarified that if any order were passed in the State's favour in future proceedings, the refund directed would not stand in the way of recovering it back.

Important Clarification

A taxpayer who has secured a final, unchallenged appellate order in its favour cannot be denied the resulting refund merely on the department's assertion that it is "in the process of" filing a further appeal. If the department genuinely intends to challenge the appellate order, it must actually file that appeal within a reasonable time; indefinite withholding of refund on the strength of a merely contemplated appeal is not sustainable, though any refund released remains subject to adjustment if the department later succeeds in a properly filed appeal.

Sections Involved

  • Section 107, Punjab GST Act, 2017/CGST Act, 2017 read with Section 20, IGST Act, 2017 — the appellate provision under which the petitioner's original, successful appeal was decided.
  • Section 130, Punjab GST Act, 2017 — confiscation and penalty provision under which the original tax, penalty and fine had been imposed and later set aside in appeal.
  • Section 54, CGST Act, 2017 — the refund provision underlying the petitioner's claim for return of the amount.

Decision – In Favour of

The decision is in favour of the Assessee. The refund-denial order was quashed and refund of the amount was directed within two weeks.

Case Details

Court: High Court of Punjab and Haryana at Chandigarh
Case No.: CWP-11082-2023 (Neutral Citation No. 2023:PHHC:139243-DB)
Coram: Justice G. S. Sandhawalia and Justice Harpreet Kaur Jeewan
Date of Order: 31.10.2023

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