Background
Order-in-Original (OIO, which partly rejected refund) was set aside by Order-in-Appeal (OIA). Fresh refund application (filed on the strength of OIA) was also rejected by a detailed (2nd) OIO on merits.
Observations
[Order of the Division Bench of the Hon'ble High Court of Delhi, dated 13.07.2026, in WP(C)/9189/2026]
Interestingly, the Delhi HC observed that the OIA neither directed unconditional release of refund nor foreclosed examination of Petitioner's entitlement on any other legally permissible ground. Consequently, the authority (which passed the 2nd OIO) cannot be said to have been precluded from examining the refund claim afresh on grounds distinct from those which stood negated by the Appellate Authority. Whether such exercise has been validly undertaken or otherwise would necessarily require an examination of the merits of the reasons recorded in the 2nd OIO.
Therefore, the Petitioner was directed to avail the alternate remedy of appeal against the 2nd OIO.
Comments
Without wading into numerous decisions which have held that refund cannot be withheld by the Revenue unless it challenged the order of the appellate authority which had allowed refund in favour of assessee, the basic questions which beg attention are:
- Can the adjudicating authority reject the claim of consequential refund arising from OIA, on grounds distinct from those which stood negated by the Appellate Authority?
- Would the act of the adjudicating authority not amount to circumventing the conditions / safeguards available under Section 54(11) of the CGST Act on withholding of refund?
- Can the adjudicating authority negate the OIA and reject the consequential refund claim by another OIO (even if he is assumingly right) when the appropriate remedy for the Revenue would have been to appeal against the OIA?
- If the Revenue later challenges the OIA, will the assessee be forced to fight on two fronts for the same issue?
