CGST Act | Commissioner Empowered To Withhold Refunds Both From Electronic Cash Ledger And Electronic Credit Ledger: Delhi HC

Section 108 empowers the revisional authority to place in abeyance “any order” made under the CGST Act, which in its opinion could be said to be illegal, improper or prejudicial to the interest of the Revenue.

In the case at hand, Petitioner had Impugned Commissioner's order under Section 108 which placed in abeyance an order of refund of INR 5,50,00,000/- from amounts standing to the credit of Petitioner's Electronic Cash Ledger.

Electronic Cash Ledger represents tax deducted by the authorities from the payment made to a supplier of taxable goods or services. Section 49(6) lays down that the balance in the Electronic Cash Ledger may be refunded in accordance with provisions of Section 54.

Petitioner's counsel had contended that restrictions with respect to utilization of funds that may stand to the credit of a ledger as contemplated under the CGST Act would be confined to the Electronic Credit Ledger alone. It was his case that no restraint on withdrawal of sums standing to the credit of the Electronic Cash Ledger could be placed under provisions of the CGST Act.

All credits accrued on account of inward supplies made by a taxpayer are accumulated in the Electronic Credit Ledger.

A division bench of Justices Yashwant Varma and Ravinder Dudeja said,

“Section 108 empowers the revisional authority to place in abeyance “any order” made under the CGST Act and which in its opinion could be said to be illegal, improper or prejudicial to the interest of the Revenue…We, therefore, find ourselves unable to sustain the contention of the petitioner who had sought to canvass a position of distinction which we should recognise to exist and governing sums which stand in balance in the Electronic Cash and Electronic Credit Ledgers.”

It noted that Section 49(6) clearly states that balance in the Electronic Cash Ledger or Electronic Credit Ledger may be refunded, after payment of tax, interest, penalty, fee or any other amount payable under the Act.

Section 54, which again stipulates that a registered person claiming refund of sums standing in balance in the Electronic Cash Ledger would have to follow the procedure as prescribed, also takes into account Section 49(6).

“Of crucial significance is the usage of the phrase “in accordance with the provisions of sub-section (6) of Section 49” as they appear in Section 54(1). Thus refund, be it from the Electronic Cash or the Electronic Credit Ledger, are essentially treated at par,” High Court observed.

It also took note of Commissioner's power under Section 54(11) to withhold a refund if it is of the opinion that the grant thereof would adversely affect the Revenue.

Nonetheless, the Court noted that there is no outstanding demand against the petitioner which may have legitimately constituted a reason to withhold the refund.

The Petitioner also laid emphasis on a complete absence of any finding which may have been indicative of the revisional authority coming to even a prima facie conclusion that the refund order was illegal, warranting exercise of power under Section 108.

“The pre-requisite condition for invocation of Section 108 is the formation of an opinion that an order made under the CGST Act is erroneous, prejudicial to the interest of the Revenue, illegal or improper. Absent any finding or conclusion having been rendered by the Commissioner in this respect, and which may have tended to indicate that the opinion expressed in the order dated 09 December 2022 was rendered unsustainable, illegal or invalid, we find ourselves unable to sustain the order impugned,” the High Court held and allowed the petition.

Appearance: Advocates Bharat Raichandani, Deepak Kumar Khokhar and Anweshaa Laskar for Petitioner; CGSC Ravi Prakash for UOI; SSC Aditya Singla with Advocates Ritwik Saha and Medha Navami for Department

Case title: M/S Hcc Vccl Joint Venture v. Union of India

Case no.: W.P.(C) 10940/2023

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