Facts of the Case:

In this case, the petitioner had filed a refund application under Section 54 of the CGST Act, 2017, claiming refund of GST paid in respect of its taxable supplies (including zero-rated/eligible supplies, as the case may be). The proper officer sanctioned the refund after due verification and passed a refund sanction order in favour of the petitioner. Aggrieved by the refund sanction, the department invoked its review powers under Section 107(2) of the CGST Act and directed filing of an appeal before the Appellate Authority on the ground that the refund was allegedly erroneous. Pursuant thereto, the departmental appeal under Section 107 was filed challenging the refund sanction order.

The Appellate Authority, after examining the grounds raised by the department, dismissed the appeal and affirmed the refund sanction granted to the petitioner. Despite the refund having been upheld in appeal, the department thereafter issued a show cause notice under Section 73 of the CGST Act, alleging that the refund earlier granted was an “erroneous refund”, and proposed recovery of the same along with interest and penalty.

The petitioner challenged the said Section 73 show cause notice and consequential proceedings before the High Court by way of a writ petition, contending that issue of refund had already been examined and concluded in appellate proceedings under Section 107; and Initiation of Section 73 proceedings amounted to reopening a concluded issue and parallel adjudication, which is impermissible in law.

Issue:

Whether, after a refund sanction order has been subjected to departmental review and appeal under Section 107 of the CGST Act and affirmed by the Appellate Authority, the GST authorities can again initiate proceedings under Section 73 for recovery of the same refund on the ground that it was an “erroneous refund”.

Held that:

The Court held that once the refund sanction order was reviewed by the department and carried in appeal under Section 107, and the Appellate Authority affirmed the refund, the matter attained statutory finality in terms of Section 107(16) of the CGST Act.  It was observed that the refund sanction order merged with the appellate order, and thereafter no independent proceedings could be initiated on the same cause of action unless the appellate order itself was challenged before a higher forum in accordance with law.

The Court categorically ruled that Section 73 cannot be used as a parallel or alternative mechanism to nullify the outcome of appellate proceedings.
What the department failed to achieve through appeal under Section 107 cannot be sought to be achieved indirectly by invoking Section 73 on identical facts and grounds.

The argument of the department that Section 73 proceedings are independent was rejected. The Court held that independence cannot be claimed in form while the substance of the proceedings remains the same, i.e., recovery of the very refund which was already upheld in appeal.

The Court emphasized that allowing such Section 73 proceedings would defeat the finality attached to appellate orders; permit endless re-litigation of the same issue; and cause serious prejudice and uncertainty for taxpayers. It was further held that the review order under Section 107(2) loses its independent existence once it culminates in an appellate order. After dismissal of the departmental appeal, the review cannot be resurrected as a foundation for fresh adjudication. The issuance of Form GST DRC-01 pursuant to the Section 73 notice was held to be purely procedural and incapable of curing the inherent lack of jurisdiction in initiating the proceedings.

Consequently, the Court held that the show cause notice issued under Section 73 and all consequential proceedings were without jurisdiction and unsustainable in law.

Case Name: Auroglobal Comtrade Pvt. Ltd. Versus Joint Commissioner Goods and Service Tax and Central Excise Bhubaneswar, Assistant Commissioner Goods and Service Tax and Central Excise Bhubaneswar-I, Commissioner Goods and Service Tax and Central Excise Bhubaneswar, Additional Commissioner, GST & CE (Appeal) Bhubaneswar Commissionerate, Chief Commissioner Goods and Services Tax, Central Excise & Customs, Bhubaneswar. dated 18.12.2025

To read the complete judgement 2025 Taxo.online 3438