GST | Parallel Proceedings On Sanctioned Refund An 'Overstep': Orissa High Court Quashes Recovery Proceedings As Appeal Order Stands

In a recent judgment, the Division Bench, comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman, observed that by initiating recovery the Joint Commissioner sought to revive a Review Order differing with the findings of the Appellate Authority. It thus 'overstepped' its jurisdiction and so the Demand-cum-Show Cause Notice could not override a quasi-judicial decision of the Appellate Authority.

Applying the principles of Res Judicata and Estoppel, the Orissa High Court culled out the distinction between administrative and quasi-judicial functions to hold that once Refund sanction order was upheld in appeal, it was final and binding. Thus, citing violation of principles of natural justice, the Orissa High Court deemed as 'unfair' the action to initiate recovery proceedings under Section 73 by giving precedence to an administrative decision over a quasi-judicial Appellate Order or decision of the Appellate Authority.

For the period April, 2022 to March, 2023 Petitioner filed for refund claim of about Rs. 14 crores relating to export of Iron Ore Fines.

While the refund sanction order was issued, the Assistant Commissioner, Goods and Services Tax and Central Excise, Bhubaneswar-I Division vide Review Order observed that Refund of Rs. 14 crores was erroneously granted. On Departmental appeal, the Refund was found to be admissible.

However, a Show Cause Notice was issued initiating recovery proceedings under Section 73 of the CGST Act on the premise of the Review Order.

As for recovery proceedings under Section 73, the Orissa High Court pointed out that by initiating multiple proceedings despite a detailed Appellate Order wherein Refund had been sanctioned was aimed at causing embarrassment to the Petitioner. By initiating unfair and calculated proceedings under Section 73 only to undermine the confidence of the public, without application of mind and/or at the instance of the superior officer was 'without jurisdiction' and 'untenable in law', the Orissa High Court opined.

From the Show Cause Notice, the Orissa High Court inferred that Review Order sought to nullify the effect of the Appellate Order, thereby, contemplating adjudication of the 'same issue'. It opined that this Reopening of a dispute in spite of a Sanctioned Refund Order was “unwholesome, arbitrary, in excess of jurisdiction and whimsical”.

The Orissa High Court critiqued challenge to a Sanctioned Refund by way of a Review Order of the Commissioner which was an administrative decision despite an unsuccessful Appellate Order. Further, it clarified that when examining Refund application, the Additional Commissioner as Appellate Authority and the Assistant Commissioner as Refund Sanction Authority, both discharged their quasi-judicial functions and duties being statutory functionaries. The High Court stated thus

“4.12. Law is no more res integra that adjudication process in tax matters are quasi judicial proceedings”

In this vein, the High Court re-iterated principles relating to governance, fair play, abuse of powers when exercising statutory functions.

Accordingly, the Orissa High Court noted that Appellate Order sanctioning Refund of about Rs. 14 crores had not been reversed by a higher authority and allowed the appeal.

Case Name: Auroglobal Comtrade Pvt. Ltd. vs. Joint Commissioner, Goods and Service Tax and Central Excise & Ors.

For Petitioner: Advocates Pranaya Kishore Harichandan, Ch. Manash Ranjan Mishra, Pragyanshree Harichandan, Pragyant Harichandan

For Respondent: Senior Standing Counsel Sujan Kumar Roy Choudhury

Click Here To Read/Download Order