GST UPDATE

Question before Hon’ble Court:

Whether the limitation period for filing an appeal by the Revenue under Section 107(2) of the CGST Act is to be computed from the date of issuance of order or from the date of its subsequent intra-departmental communication to the reviewing authority?

Hon’ble Court:	Karnataka High Court
Case Title	THE COMMISSIONER OF CENTRAL TAX VS M/S. JEANS KNIT PRIVATE LIMITED
Appeal No. & Citation	WA No. 966 of 2026
Date of Order	16 September 2026
Outcome	Appeal filed by the department is dismissed

Brief Facts of the Case

M/s. Jeans Knit Private Limited, a 100% Export Oriented Unit (EOU), imported certain capital goods during the period from 1 July 2017 to 13 October 2017 and paid IGST under Section 3(7) of the Customs Tariff Act, 1975. The assessee claimed refund of accumulated and unutilised input tax credit (ITC) on the basis that its supplies were zero-rated supplies. Accordingly, it filed six refund applications for the period July 2017 to December 2017, which were sanctioned by the adjudicating authority. Subsequently, the Commissioner of Central Tax reviewed the refund sanction orders under Section 107(2) of the Central Goods and Services Tax Act, 2017, taking the view that ITC relating to capital goods had been wrongly included in the refund claim. Consequently, the Revenue filed appeals before the Commissioner (Appeals), along with applications seeking condonation of delay.
The Commissioner (Appeals) rejected the assessee's objection regarding limitation, condoned the delay, and allowed the Revenue's appeals and held that refund has been erroneously granted and directed recovery of the amount along with interest. Aggrieved by the appellate order, the assessee filed Writ Petition before the Karnataka High Court, challenging the validity of Rule 89(4) of the CGST Rules and the order passed by the Commissioner (Appeals). The learned Single Judge held that the Revenue's appeals were time-barred. The Revenue thereafter filed the present writ appeal challenging that decision.

Brief Arguments by Appellant - Department

The Revenue contended that the review orders in respect of the refund sanction orders for the respective tax periods had been passed beyond the prescribed period of six months from the date of communication of the original orders. Consequently, none of the review orders could have authorised the filing of appeals within the stipulated period of limitation. On this basis, it claimed that the appeals had been filed within the prescribed period or within the period that could be condoned under Section 107(4).
The Revenue further relied on the fact that the appeals arose from a post-audit exercise and argued that recovery of erroneously refunded amounts could, in any event, be initiated under Section 73 of the CGST Act.
In the applications seeking condonation of delay, the Revenue cited shortage of staff and administrative reasons as the cause of delay in filing the appeals.

Brief Arguments by Respondent - Taxpayer

The assessee objected to the appeals as being barred by limitation. It questioned the delay of approximately four to six months in communicating the refund sanction orders to the reviewing authority, particularly when the offices concerned were situated on the same floor.
The assessee disputed the Revenue's attempt to calculate limitation from the dates of subsequent departmental communication rather than the dates on which the refund sanction orders had been issued. It also contested the Revenue's appeals on merits, including the contention that ITC relating to capital goods was not eligible for refund under Rule 89 of the CGST Rules

Findings and Judgement

Statutory Time Limit for Departmental Appeals under Section 107(2)

The Court observed that Section 107(2) of the CGST Act empowers the Commissioner, either suo motu or upon a request from the Commissioner of State Tax or Union Territory Tax, to examine the legality or propriety of an order passed by the adjudicating authority and direct an officer subordinate to him to apply to the Appellate Authority for determination of the specified points arising from such order. Such application is required to be made within six months from the date of communication of the decision or order. The limitation prescribed under Section 107(2) is, therefore, mandatory and circumscribes the power of the Revenue to initiate appellate proceedings.

Date of Communication and Commencement of Limitation

The Court held that the date on which the audit is conducted or audit objections are raised is not relevant for determining the period of limitation. The limitation begins to run from the date of communication of the order and not from the date of the audit observations. The Revenue cannot claim an extension of the statutory period merely because the order was examined during a subsequent audit or review exercise.

Intra-Departmental Communication Cannot Extend Limitation

Relying upon the decision of the Delhi High Court in Grapes Digital Pvt. Ltd. v. Principal Commissioner and Another, the Court held that, in the context of intra-departmental communication, the expression “communication of the decision or order” under Section 107(2) must be construed as the date of issuance of the order. There is no statutory provision requiring the adjudicating authority to communicate its order separately to the jurisdictional Commissioner for the purpose of initiating departmental appeal proceedings. Allowing the limitation period to depend upon the date on which the reviewing authority actually receives the order would be contrary to the legislative intent of prescribing a strict time frame for filing appeals.

Effect of CBIC Instructions dated 14.06.2022

The Court relied upon Instruction No. 03/2022-GST dated 14.06.2022, which requires refund orders to be sent online to the review branch immediately after issuance. It further provides that post-audit must be completed within three months and the review must be completed at least 30 days before the expiry of the appeal limitation period. Therefore, the Court held that the Revenue could not justify the delay of five to six months by claiming that the reviewing authority had received the refund orders late.

Communication of Orders through the Common Portal under Section 169

The Court referred to Section 169(1)(d) of the CGST Act, which recognises making a communication available on the common portal as a valid mode of service. Accordingly, the Revenue could not postpone the commencement of limitation by relying upon delayed intra-departmental communication.

Recovery Proceedings under Section 73 Do Not Extend Appellate Limitation

The Court held that the possibility of initiating separate proceedings for recovery of an erroneously refunded amount under Section 73 of the CGST Act is wholly irrelevant for determining whether a departmental appeal has been filed within the prescribed limitation period. The limitation for filing an appeal under Section 107 cannot be extended by relying upon the time limit available for recovery proceedings under Sections 73 or 74 of the Act. The Commissioner (Appeals) had, therefore, erred in rejecting the assessee’s objection on this ground.

Limited Power to Condon? Delay under Section 107(4)

The Court observed that Section 107(4) permits the Appellate Authority to condone delay only for a further period of one month beyond the prescribed period of three months or six months, as applicable. The Appellate Authority has no jurisdiction to condone delay beyond this additional period. In the present case, the delay in filing the departmental appeals exceeded the permissible condonable period. The Commissioner (Appeals) had, therefore, committed an error in holding that the delay could be condoned under Section 107(4).
In view of the above findings, the Court held that the departmental appeals were barred by limitation under Section 107(2) of the CGST Act. Accordingly, the writ appeal was dismissed.

CA Pradeep Jain_

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GST update /2026-27/0110

GST UPDATE

Question before Hon’ble Court:

Brief Facts of the Case

Brief Arguments by Appellant - Department

Brief Arguments by Respondent - Taxpayer

Findings and Judgement

Opinion

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