Dismissing the Department's appeal, the Tribunal held that a pending probe does not convert a provisional reversal into an established liability, and a later demand order cannot retrospectively justify the refund rejection.
The Lucknow Bench of the GST Appellate Tribunal has dismissed the Department's appeal and upheld an order directing refund of ₹14.35 crore that an edible oil manufacturer had provisionally reversed as input tax credit in August 2018, following an Income Tax search [Ajit Kumar Minz v. M/s. B.L. Agro Industries Limited].
The Bench of Santosh Kumar Srivastava, Member (Judicial), and Arvind Kumar, Member (Technical), held that the refund could not be rejected merely because the reversal was voluntary or because an investigation into the alleged stock shortage was pending.
During an Income Tax search in October 2018, a stock discrepancy of about ₹287 crore was alleged. By a letter dated October 8, 2018, the company told the GST authorities that it had provisionally reversed ITC of ₹14.35 crore in its August 2018 GSTR-3B to safeguard revenue, while reserving its right to seek restoration once the facts were ascertained.
Its refund claim was rejected on June 13, 2025 on the grounds that the reversal was voluntary, formed part of self-assessment, and that the investigation was pending. The Additional Commissioner (Appeals) set this aside on September 2, 2025 and directed credit of the amount to the electronic credit ledger.
Separately, an Order-in-Original dated December 23, 2025 confirmed a demand of ₹14.36 crore under Section 74, treating the gap between book stock of ₹406.86 crore and physical stock of ₹119.60 crore, as reported by the Income Tax Department, as clandestine removal. The company's appeal against that order is pending.
Before the Tribunal, the Department argued that the reversal was a self-assessed liability under Section 59, that the later demand order confirmed the liability, and that the refund was premature.
The Tribunal found the distinction between Table 4(B)(2) and Table 3.1 of GSTR-3B material. The reversal was shown as an ITC reversal, and no output liability for the alleged shortage was declared in Table 3.1.
"The mere fact that a registered person has furnished a return under Section 39 does not mean that every amount disclosed in every table of that return constitutes an admitted tax liability," the Tribunal held, adding that the contemporaneous letter of October 8, 2018 assumed particular significance.
On the pending probe, it was categorical: "The pendency of an investigation is not equivalent to a determination of tax liability." An investigation cannot, merely by remaining pending, authorise indefinite retention of an amount.
The Tribunal held that the later Order-in-Original could not retrospectively cure the reasoning of the refund rejection, had not attained finality, and could not be relied on merely because the amounts were broadly similar. The Department must show the legal and factual nexus between the 2018 reversal and the liability confirmed in 2025.
It also observed that stock data received from the Income Tax Department may be a legitimate lead for a GST investigation, but a difference in stock valuation does not, without further examination, conclusively establish clandestine removal. That question was left to the separate proceedings.
Relying on Brindavan Beverages, Reckitt & Colman, Saci Allied Products and Caprihans India, the Tribunal reiterated that a case cannot be sustained on grounds outside the show cause notice. It distinguished Bhumi Associate, Vallabh Textiles and Baba Contractors as cases of coercive deposits during search.
Revenue protection, the Tribunal said, must operate within the statutory framework. The refund remains subject to verification that it satisfies the requirements of Section 54.
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