Facts of the Case

The petitioner, DL Support Services India Private Limited, filed a writ petition challenging an appellate order dated 19.04.2022 denying refund of Integrated GST paid on export of services for April 2020.

The petitioner had claimed a refund of ₹13,10,508/- which was initially processed without deficiency. Subsequently, a show cause notice dated 20.07.2021 was issued proposing rejection of refund on the ground that the petitioner and overseas service recipients were not distinct persons.

The Adjudicating Authority rejected the refund claim. On appeal, the Appellate Authority accepted that the petitioner and foreign entities were separate persons but still denied refund on a new ground—holding the petitioner to be an “intermediary,” thereby disqualifying the services as export of services.

Issues Involved

  1. Whether the Appellate Authority can introduce a completely new ground (intermediary classification) not mentioned in the show cause notice.
  2. Whether such action violates principles of natural justice.
  3. Scope and limits of powers under Section 107(11) of the CGST Act.

Petitioner’s Arguments

  • The appellate order is beyond jurisdiction as it introduces a new ground not part of the show cause notice.
  • The Appellate Authority cannot set up a new case independently.
  • Section 107(11) permits modification but not creation of a new basis for denial.
  • No opportunity was given to respond to the “intermediary” allegation.
  • The second proviso to Section 107(11) applies only where refund is already granted, which is not the case here.

Respondent’s Arguments

  • The Appellate Authority has wide powers to modify orders and examine all relevant aspects affecting tax liability.
  • It can adjudicate issues having a bearing on tax, refund, or input tax credit.

Court Findings / Judgment

  • The Court noted that the Appellate Authority accepted that the petitioner and foreign clients are separate entities, satisfying Section 2(6) conditions.
  • However, denial of refund on a completely new ground (intermediary status) was not part of the show cause notice.
  • The petitioner was not given an opportunity to respond to this new ground.
  • This amounts to violation of principles of natural justice.
  • The Court held that the question of whether the Appellate Authority can introduce new grounds must first be examined by the authority itself.

Court Order

  • The impugned appellate order was set aside.
  • The matter was remanded back to the Appellate Authority for fresh adjudication.
  • The authority must:
    • Consider jurisdictional limits under Section 107(11)
    • Provide opportunity of hearing
    • Decide the appeal afresh within 8 weeks

Important Clarification

  • Appellate Authorities cannot introduce new grounds not forming part of the show cause notice without giving an opportunity to the assessee.
  • Doing so violates natural justice principles.
  • The scope of Section 107(11) does not clearly extend to setting up an entirely new case. 

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB22032023CW103012022_120929.pdf 

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