The Division Bench, led by the Chief Justice, held that the Commissioner cannot rely on intra-departmental delays of five to six months in receiving orders passed by officers on the same floor to expand the six-month window for filing departmental appeals against refund sanctions.
The Karnataka High Court has dismissed a writ appeal filed by the Commissioner of Central Tax, Bengaluru, upholding the Single Judge's order which had set aside the Commissioner (Appeals)'s order reversing refund sanctions totalling ₹33,88,40,732 granted to an Export Oriented Unit for accumulated ITC on capital goods for July to December 2017 [Commissioner of Central Tax Bengaluru v. M/s. Jeans Knit Private Limited].
The respondent-assessee, an EOU in the textiles sector, had been sanctioned refunds between January and March 2018. The Commissioner's office issued review orders in February 2019 — approximately twelve months after the refund sanctions — directing departmental appeals. The appeals were filed before the Commissioner (Appeals), who condoned the delay and allowed the Revenue's appeals, reversing the refund sanctions. The Single Judge set aside the appellate order on the ground that the review orders themselves were passed beyond the six-month limitation period prescribed under Section 107(2) for departmental appeals.
The Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha examined the central question: when does "communication of the decision or order" occur for the purpose of Section 107(2) in the context of intra-departmental review of refund orders? The Revenue contended that communication should be reckoned from the date the Commissioner's office physically received the refund sanction orders, which it claimed was five to six months after their issuance. The Court rejected this contention, following the Delhi High Court's decision in Grapes Digital Pvt. Ltd. v. Principal Commissioner, and held that "communication" in Section 107(2) means the date of issuance of the order. The Court placed particular reliance on CBIC Instruction No. 03/2022-GST, which mandates online transmission of orders to the review module immediately upon issuance, thereby eliminating any time lag between issuance and receipt within the Department.
The Court also rejected the Revenue's argument that the Commissioner (Appeals) had independent jurisdiction to entertain the appeals by reference to the recovery powers under Section 73, holding that the limitation for filing an appeal cannot be extended by reference to the limitation for recovery proceedings — the two are distinct statutory mechanisms. The decision is significant for exporters and EOUs who received refund sanctions that were later reversed through delayed departmental appeals. Such assessees should now examine whether the review orders in their cases fell outside the six-month window computed from the date of issuance — not receipt — of the original refund sanction orders.
