Case Title, Court, Petition No., Category, Statutory Provisions, Date

M/s Mahajan Fabrics Pvt. Ltd. v. Commissioner, CGST & Ors.
High Court of Delhi at New Delhi
W.P.(C) 6727/2022
Category: Refund – Input Tax Credit (Unutilised ITC under Section 54)
Date of Judgment: 06 February 2023
Relevant Provisions:

• Section 54, Section 16, Section 107(2) – CGST Act, 2017

• Rule 89(1) – CGST Rules, 2017

Facts of the Case (Paras 1–8, 14–16)

The petitioner, Mahajan Fabrics Pvt. Ltd., filed a refund claim of ₹22,32,502/- comprising CGST ₹16,22,489/- and SGST ₹6,10,013/- under Section 54, read with Rule 89(1). The Assistant Commissioner allowed the refund through the Order-in-Original dated 12.09.2019.

Later, the Commissioner invoked Section 107(2) and reviewed the order, directing filing of an appeal solely on the premise that two vehicle numbers mentioned on two invoices were not traceable on the e-Vahan portal (Paras 5–7). Based on this assumption, he concluded that all 126 invoices were dubious.

The Appellate Authority examined the matter and confirmed that the two vehicles were in fact registered on the e-Vahan portal (Para 8). Despite this finding, the appellate authority reversed the refund on a fresh ground that the petitioner had not demonstrated receipt of goods for the remaining 124 invoices (Para 9).

Questions/Issues Before the Court

1. Whether Revenue’s appeal under Section 107(2) could be sustained when the very foundation of the review order—non-existence of two vehicle numbers—was factually incorrect?

2. Whether the Appellate Authority erred in introducing a fresh reasoning unrelated to the review order to deny refund?

3. Whether details of all vehicle registrations are required in law as a pre-condition to avail ITC or refund under Section 54 read with Section 16?

Court’s Observations (Paras 11–18)

The Court observed that no provision under Section 16 or any other part of the CGST Act mandates production of vehicle registration details or proof of e-Vahan verification (Para 11).

It further held that:

• The explanation to Section 16(2)(b) provides a deemed receipt of goods, which the petitioner satisfied (Para 13).

• All required details were already disclosed in returns, on the basis of which the original refund was sanctioned (Para 14).

• The review order dated 15.03.2020 was based on an entirely erroneous factual assumption that the vehicles were unregistered (Paras 15–16).

• Once the appellate authority found the assumption to be wrong, it should have dismissed the Revenue’s appeal outright instead of creating new grounds to deny refund (Para 17).

• No adverse finding existed that the petitioner’s invoices or records were false (Para 18).

Judgment / Final Verdict (Paras 19–21)

The High Court held that:

• The impugned order dated 30.12.2021 (Order-in-Appeal) was unsustainable, as the foundation of the Revenue’s appeal was flawed.

• The Appellate Authority exceeded jurisdiction by introducing a new basis unrelated to the review order.

• The writ petition was allowed, the appellate order was set aside, and the Revenue was directed to disburse the refund sanctioned by the Order-in-Original dated 12.09.2019.

Summary of Cases Referred

Between Fine Lines (Practical Takeaways for Trade & Industry)

This judgment underscores that refund claims cannot be rejected on speculative doubts such as alleged mismatches of vehicle numbers without statutory backing. The Department cannot shift goalposts by introducing new grounds at the appellate stage when the review order itself is flawed. Taxpayers must ensure compliance with Section 16 conditions, but authorities must base objections strictly on law and evidence—not assumptions.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”