Kunal International Vs Union of India & Ors (Delhi High Court)

The Delhi High Court, in the case of Kunal International v. Union of India & Ors., addressed a crucial issue regarding the disbursement of a Goods and Services Tax (GST) refund. The petitioner, Kunal International, sought a refund of input tax credit (ITC) for goods exported without tax payment during March 2020. The dispute arose after the tax authorities refused to disburse the refund, even though the petitioner had won their appeal at the Appellate Authority level. The court’s decision clarifies that a favorable order from the Appellate Authority must be complied with, regardless of the government’s intention to file a further appeal.Factual Background and Legal ProceedingsKunal International, a company engaged in exporting goods, had applied for a refund of ₹71,13,806 in ITC. The Adjudicating Authority, however, sanctioned only a partial refund of ₹9,23,957. The authority justified the rejection of the remaining amount by asserting that the petitioner had wrongly availed an ITC of ₹1,92,78,267. This initial decision led the petitioner to file an appeal under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act).The Appellate Authority ruled substantially in favor of Kunal International, directing the refund of ₹61,79,004.20 and setting aside the lower authority’s order. Despite this clear directive, the respondents (the Union of India and its tax departments) failed to disburse the sanctioned amount. Their refusal to pay prompted the petitioner to file a writ petition with the Delhi High Court.The Respondents’ Stance and Legal JustificationIn their counter-affidavit, the respondents explained their non-compliance. They stated that the competent authority had reviewed the Appellate Authority’s order and had decided to appeal it before the GST Appellate Tribunal. However, they admitted their inability to do so because the Tribunal had not yet been constituted. The respondents’ counsel cited the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019, which extends the limitation period for filing appeals until a specified time after the President of the Appellate Tribunal assumes office. This legal provision was presented as the reason for the delay, suggesting that the government’s right to appeal justified holding the refund.Court’s Reasoning and Judicial PrecedentThe Delhi High Court rejected the respondents’ argument. The court pointed out that while a serious legal controversy exists regarding the Central Government’s power to extend statutory limitation periods via an order, it was unnecessary to delve into that issue for this case. The core of the matter was the government’s reluctance to comply with an existing, valid order from the Appellate Authority.The court’s central finding was that an order passed by a competent authority, such as the Appellate Authority, must be complied with unless it is stayed by a higher authority or court. The mere intention to file an appeal does not suspend the operation of an order. The court stated, “we are unable to accept that the respondents can ignore the said order and not comply with the same, without a competent authority or court staying the said order.” This position upholds the principle that judicial and quasi-judicial orders are binding unless explicitly overturned or stayed.The court referenced its previous decision in Alex Tour and Travel Private Limited v. Assistant Commissioner, CGST, Division-Janakpuri, noting that the issue was already covered by that precedent. In that case, the court had similarly directed the disbursement of a refund despite the tax department’s intention to appeal to the non-existent Appellate Tribunal. This judicial precedent strengthened the court’s stance and provided a clear legal basis for its decision.Holding and Final DirectionsThe Delhi High Court allowed the petition, directing the respondents to “forthwith disburse the refund as sanctioned by the Appellate Authority in terms of the order dated 07.04.2021.” The court’s order was unequivocal and aimed to ensure that a successful litigant does not suffer due to administrative or institutional delays.However, the court also provided a crucial clarification. It stated that the order would not prevent the respondents from pursuing their statutory remedies against the Appellate Authority’s order once the Tribunal is constituted. Furthermore, it specified that if the respondents were to succeed in their appeal, they would be entitled to seek consequential orders for the recovery of the disbursed amount. This clarification balanced the petitioner’s right to receive the refund with the government’s statutory right to appeal, ensuring fairness to both parties.The judgment is a significant reminder to tax authorities that they cannot use the non-constitution of a tribunal as a reason to delay compliance with binding orders. It reinforces the rule of law and the principle that orders must be respected unless they are stayed or set aside by a higher judicial body. The decision provides a clear pathway for businesses and taxpayers facing similar situations, ensuring that due process and timely relief are not denied.