GST Refund Rejection and Recovery Orders Challenged: Patna HC Directs to avail Statutory Appeal Remedy [Read Order]

The Patna High Court, in a recent order directed the petitioner to avail the statutory appellate remedies available under the Goods and Services Tax Act, 2017 ( GST Act ), while disposing of a writ petition challenging refund rejection and recovery orders issued by the GST department.

The Division Bench comprising Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey observed that the petitioner, having an effective appellate remedy under Sections 107 and 112 of the BGST Act, cannot bypass the statutory mechanism by invoking the writ jurisdiction under Article 226 of the Constitution.

The petitioner, M/s Greentech Auto LLP a registered dealer engaged in the automobile sector, had filed refund claims on account of accumulated Input Tax Credit (ITC) arising from the inverted duty structure for the financial years 2022-23 and 2023-24.

The refund applications, amounting to ₹28.40 lakh and ₹57.18 lakh respectively, were initially sanctioned but later reversed by the department through orders dated 03.08.2024 and 05.09.2024, alleging irregularities in the modus operandi of refund claims.

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Subsequently, recovery notices were issued demanding repayment of the refunded amounts along with interest and penalty aggregating to nearly ₹32 lakh. The appellate authority also rejected the petitioner’s appeal vide order dated 21.05.2025, confirming the refund rejection.

The petitioner challenged the refund rejection and recovery proceedings on grounds of procedural illegality and violation of principles of natural justice. It was argued that the orders were passed mechanically, without considering the detailed replies submitted in response to the show-cause notices.

The petitioner also contended that the appeal order was defective and that recovery proceedings initiated during the pendency of appellate proceedings were without jurisdiction. Hence, the petitioner sought a writ to quash the orders and stay recovery proceedings.

The State, represented by Standing Counsel-11, opposed the maintainability of the writ petition. It was argued that the petitioner had adequate alternate remedies, an appeal under Section 107 against the orders passed under Section 73(9) of the BGST Act and a second appeal under Section 112 against the appellate order.

It was further submitted that the petitioner had already approached the High Court earlier in CWJC No. 16656 of 2024 on similar grounds, but failed to challenge the impugned orders at that stage. Therefore, the present petition was barred by constructive res judicata.

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The Bench observed that the petitioner indeed has a statutory remedy under Section 112 of the BGST Act to challenge the appellate order, and for the refund recovery orders, the remedy lies under Section 107.

The court, considering the fact that the GST Appellate Tribunal has not yet been constituted, permitted the petitioner to file the second appeal once the Tribunal becomes functional.

The Bench also clarified that, in the meantime, the petitioner may seek a stay of recovery by depositing 10% of the disputed demand, which the competent authority shall consider in accordance with law.

While disposing of the writ petition, the Court directed as follows: “The petitioner may file a second appeal under Section 112 of the BGST Act, 2017 against the appellate order dated 21.05.2025, and may also avail remedy under Section 107 against the refund recovery orders dated 03.08.2024 and 05.09.2024. If any such appeal is preferred within 30 days, the Appellate Authority shall consider the same keeping in view that the petitioner was pursuing remedy before this Court.”

Mr. Deepak Kumar, Advocate appeared for the petitioner and Mr. Vikash Kumar, Standing Counsel-11 appeared for the department.

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