The Bombay High Court has granted interim protection to a taxpayer in an important GST dispute concerning the legality of reopening a refund already sanctioned through a speaking order. 

The bench of Justice M. S. Karnik and Justice Sandesh D. Patil observed that significant questions arise regarding whether tax authorities can bypass the statutory appellate mechanism and invoke proceedings under Section 73 of the Central Goods and Services Tax (CGST) Act to recover a refund previously granted through a finalized order. Pending further hearing, the Court directed that no coercive action be taken against the petitioner. 

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The case involved a challenge to an order passed under Section 73 of the CGST Act treating an earlier refund as “erroneously granted.” According to the petitioner, a detailed speaking order sanctioning the refund had already been issued and had attained finality. It was argued that if the authorities believed the refund order to be legally incorrect, the proper course available under the GST law was to file an appeal under Section 107 of the CGST Act within the prescribed limitation period rather than initiating fresh proceedings under Section 73. 

A key issue raised before the High Court was whether tax authorities can reassess the same set of facts and characterize an already sanctioned refund as erroneous through separate adjudication proceedings. The petitioner contended that such an approach effectively bypasses the statutory appellate framework established under the GST regime and undermines the finality attached to speaking orders. 

Another important question before the Court concerned the interpretation of the export of services provisions under GST law. The petitioner argued that the condition prescribed under Section 2(6)(iv) of the CGST Act—requiring receipt of export consideration in convertible foreign exchange—stood satisfied where the foreign currency was credited into the petitioner’s own Nostro account in accordance with permissions granted under the Foreign Exchange Management Act (FEMA) and Reserve Bank of India regulations. The petitioner emphasized its status as an Authorized Dealer Category-I (AD-I) bank while advancing this argument. 

The State authorities, however, defended the impugned action by contending that Section 73(1) empowers the department to recover refunds that have been erroneously granted. It was submitted that sufficient reasons had been recorded to support the recovery proceedings initiated against the petitioner. 

The bench noted that the matter involved substantial legal questions and directed the respondents to file their affidavit-in-reply within three weeks. Importantly, the Court ordered that no coercive steps should be taken against the petitioner until the next date of hearing, providing interim protection in the matter. 

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