Departmental Appeal Plan Cannot Defeat GST Refund: Telangana HC

ADV Industrial Services Private Limited Vs Union of India (Telangana High Court)

Summary: The Telangana High Court quashed a GST refund rejection concerning ₹19,33,34,320 claimed by ADV Industrial Services Private Limited, which rents and leases prefabricated warehouses. The Directorate General of GST Intelligence had questioned input tax credit on works contract services used in constructing the warehouses under Section 17(5) of the CGST Act. During investigation, the company reversed ₹15,99,60,570 from its credit balance and paid ₹3,33,73,750 in cash through DRC-03. An adjudication order dated 13.09.2024 confirmed the demand with interest and penalty and appropriated the amount paid or reversed.

On 16.09.2025, the appellate authority allowed the company’s appeal and set aside the demand. Its findings addressed both Section 17(5)(c) and (d), the proposed leasing of the warehouses, and the movable character of certain structural components. The company applied for consequential refund on 28.10.2025, supplying DRC-03 records, ledgers and a chartered accountant’s certificate on unjust enrichment. The refund officer nevertheless rejected the entire claim on 12.01.2026. The officer referred to an internal review finding the appellate order improper, a proposed departmental appeal, the absence of an express refund direction, and accounting records showing capitalization and depreciation.

The Court held that the appellate order remained operative and binding under Section 107(16). No competent forum had stayed, varied or set it aside when the refund was refused; the Department filed its GSTAT appeal only on 25.03.2026. An internal decision to appeal could not suspend the order. The refund officer could examine statutory refund requirements under Section 54 but could not reopen the appellate finding on entitlement to the disputed ITC. An express refund direction in the appellate order was unnecessary for the company to seek consequential relief after the underlying demand was set aside.