GST Authorities Cannot Reopen Refund Through Section 73 After Appellate Confirmation

The petitioner, Auroglobal Comtrade Pvt. Ltd., claimed refund of accumulated Input Tax Credit amounting to Rs. 14.80 crore for exports made without payment of tax for the period April 2022 to March 2023. A show cause notice was initially issued proposing partial rejection due to short shipment, following which the petitioner admitted an inadmissible portion of Rs. 25.56 lakh. The Assistant Commissioner sanctioned refund of Rs. 14.54 crore through a speaking order.

The Commissioner, invoking Section 107(2) of the CGST Act, directed filing of a departmental appeal alleging erroneous grant of refund. The appeal was dismissed by the Additional Commissioner (Appeals), who upheld the refund order on merits. Despite this, the Joint Commissioner issued a demand-cum-show cause notice under Section 73 seeking recovery of the same refund amount with interest and penalty, prompting the petitioner to approach the High Court.

Main Issue: Whether GST authorities can initiate proceedings under Section 73 of the CGST Act to recover a refund after the refund order has been examined and upheld by the appellate authority under Section 107.

HC’s Verdict: The Orissa High Court quashed the demand-cum-show cause notice and the summary show cause notice issued under Section 73. The Court held that once the refund sanction order was upheld by the appellate authority, it attained finality under Section 107(16) of the CGST Act and was binding on the department. Initiating recovery proceedings on the same issue amounted to an impermissible attempt to override a quasi-judicial appellate order through administrative review.

The Court emphasized judicial discipline, held that subordinate authorities cannot sit in appeal over appellate decisions, and ruled that the impugned proceedings were arbitrary, without jurisdiction, and contrary to principles of natural justice.

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