Erroneous GST Refund Recovery: Reading Down Sections 73, 74 and 74A of CGST Act, 2017

Summary: The recovery of erroneous refunds under the Central Goods and Services Tax Act, 2017 raises an important question concerning the relationship between demand proceedings under Sections 73 and 74, Section 74A and the statutory mechanisms for review, appeal and revision. This article argues that where a refund has been sanctioned through a reasoned quasi-judicial order under Section 54 read with Rule 92, the Department should ordinarily challenge that order through the remedies prescribed under Sections 107 and 108 rather than initiate fresh proceedings seeking recovery of the same amount. It examines the legal meaning of an erroneous refund, the finality attached to appellate and revisional orders under Sections 107(16), 108(3) and 113(6), and the significance of Forms GST RFD-06, GST RVN-01 and GST APL-04. Particular attention is given to the Orissa High Court’s ruling in Auroglobal Comtrade Pvt. Ltd., which questioned parallel adjudication under Section 73 on an issue already addressed in appeal. The article contrasts this position with Ganesh Ores Pvt. Ltd. Vs State of Odisha, where the Supreme Court declined to interfere with an order permitting a Section 74 notice notwithstanding an earlier refund sanction. The author proposes a harmonious interpretation that preserves demand proceedings for provisional refunds, refunds processed without final adjudication, fraudulently obtained refunds and payments exceeding sanctioned amounts, while protecting the statutory appeal and revision hierarchy from unnecessary duplication. The analysis emphasises certainty, judicial discipline, predictability and ease of doing business in GST administration.

Introduction: Certainty as a Condition of Ease of Doing Business

Simplification of GST and of its administration has become the declared direction of policy. In its 2025 Article IV Consultation on India (IMF Country Report No. 25/314, November 2025), the IMF noted in paragraph 16 that the GST reform is a major step in reducing the complexity of the tax structure and, by simplifying its administration, is likely to reduce disputes and encourage compliance. The same theme ran through the 57th meeting of the GST Council on 8 October 2026, where dispute resolution, refunds and compliance were among the stated areas of reform.

The CBIC has recently followed with a series of circulars and administrative instructions aimed at ease of doing business. These measures serve a larger purpose. Growth, of which GDP is the usual barometer, depends on a tax system that taxpayers can predict. Certainty is one of the classical canons of taxation, and a reform that simplifies rates but leaves procedure uncertain falls short of its aim. Such measures achieve their purpose only if the law is kept under continuous review, so that clogs in it are identified and removed through clarifications, advance rulings or amendments.

In indirect taxes, a refund is better understood as release of working capital than as revenue. A legitimate refund returns to the taxpayer money that was never the Government’s to keep, and GST has accordingly automated much of the refund process. A refund that is not legitimate is erroneous and is recoverable. What this article examines is whether the present manner of recovering an erroneous refund is itself a source of uncertainty.

What Makes a Refund “Erroneous”

The CGST Act, 2017 does not define the term “erroneous”, so recourse is to had its ordinary and legal meaning. Black’s Law Dictionary describes the term as involving error or deviating from the law, and says it is not used to designate a corrupt or evil act. An erroneous judgment, on that definition, is one rendered according to the course and practice of the court but contrary to law, on a mistaken view of law or a wrong application of legal principles.

A refund is therefore erroneous when it involves an error that deviates from the law. Whether it does so is a question about the correctness of a decision, and the Act has a mechanism for deciding such questions: appeal, review and revision under sections 107 and 108, with the finality that sections 107(16), 108(3) and 113(6) attach to orders at those tiers.

Two propositions follow, and the rest of this article delves around. First, where the error is a mistake of law or fact in the sanctioning officer’s own decision, it belongs to review and revision, and a fresh notice under section 73 or 74/74A sits uneasily beside them, producing parallel proceedings on the same refund. Second, where the refund was obtained by fraud, wilful misstatement or suppression of facts, those ingredients are not what review, revision or appeal examine, and a show cause notice is the proper recourse.

1. The question

Sections 73(1) and 74(1) of the CGST Act, 2017 permit a notice where tax has been “erroneously refunded”. In practice, however, almost every refund is sanctioned by a reasoned order in FORM GST RFD-06, passed after a notice in RFD-08 and a reply in RFD-09. The Act separately provides how such an order may be reopened: by review under section 107(2) and an appeal under section 107(3), or by revision under section 108, each with its own time limit and each preceded by an opportunity of hearing.

This raises a question of harmony. Can the Department bypass these routes and recover the same refund by a notice under section 73 or 74? Respectfully disagreeing the Apex Court ruling in the case of Ganesh ores Pvt. Ltd., vs State of Odisha (SLP No. 5208 of 2022), this article argues that the answer is no where the refund rests on a reasoned sanction order, and yes where it does not. It proposes reading down the “erroneously refunded” limb accordingly.

2. The scheme in outline

A refund under section 54 is sanctioned or rejected by the proper officer after examining the claim, and Rule 92 requires a speaking order in RFD-06. That order is a quasi-judicial decision on the claimant’s entitlement.

The Act then provides three routes for correcting such an order:

• Review and appeal under section 107(2) and (3). The Commissioner examines the order and directs an appeal before the Appellate Authority.
• Revision under section 108. The Revisional Authority may revisit an order that is erroneous and prejudicial to the interest of revenue, after a notice in RVN-01 (Rule 109B) and a hearing, within the limit in section 108(2).
• Recovery under sections 73, 74 (and, from FY 2024-25, 74A). The proper officer issues a show cause notice for tax “erroneously refunded”.

The third route is the one that sits uneasily with the first two.

3. No power to review one’s own order without a statute

The starting point is a settled principle: an authority has no inherent power to review its own quasi-judicial order. Such power exists only if the statute confers it. The CGST Act confers it on the Commissioner (section 107(2)) and the Revisional Authority (section 108), and attaches conditions: the Commissioner acts through the Appellate Authority, and revision is subject to limitation and to the bars in section 108(2).

4. What the finality clauses add

Sections 107(16), 108(3) and 113(6) declare that appellate, revisional and Tribunal orders are final and binding on the parties, subject to the further remedies in sections 117 and 118.

Where the refund issue has been carried through the hierarchy, a fresh notice under section 73 reopens a matter that a statute has declared final. The Hon’ble High Court of Orissa took this view in Auroglobal Comtrade Pvt. Ltd. The position is analogous where the Appellate authority or Revisionary authority modifies or annuls the order because the APL-04 summaries the demand confirmed by that final order and not the amount X sanctioned out of the originally sanctioned. Had the APL-4 contained wordings as amount sanctioned, it would entail SCN for recovery of the excess amount to what was originally granted.

5. Rule 109B,113 and 115 and the form “demand confirmed”

Rule 109B (2), Rule113 and Rule 115 require the order to be accompanied by a summary in APL-04 “clearly indicating the final amount of demand confirmed”. This indicates the scheme treats recovery of erroneous refund as the consequence of review or revision without recourse to section 73 or 74/74A. In such cases, the proper officer cannot, by a notice of his own, revisit what an appellate authority has decided. Doing so appears to be without authority of law and equally disregards judicial discipline

6. Where sections 73 and 74 retain a field

Reading down is different from reading out. On this reading, “erroneously refunded” continues to apply in the following cases:

• Provisional refunds. A provisional refund under section 54(6) is paid before the claim is finally determined.
• Refunds paid without a reasoned order. Where a refund is processed without an adjudication order as in system-processed export refunds.
• Fraud, wilful misstatement or suppression. A sanction obtained by such means is vitiated. The officer was not truly deciding the claim on the true facts, and section 74 (and section 74A on the corresponding limb) can operate.
• Duplicate or arithmetical excess. Where the amount credited exceeds what the order itself sanctioned.

8. The proposed reading

The harmonious construction can be put in three propositions.

• Where a refund has been sanctioned by a reasoned order after examination of the claim, the Department’s remedy against it lies in section 107(2) and section 108, within their time limits. Sections 73/74 do not authorize reopening it.
• Where the sanction order has been affirmed/modified or annulled in appeal, revision or by a court, no notice under section 73 or 74/74A lies at all, by reason of sections 107(16), 108(3), 113(6), 117 and 118.
• Where the refund is not a final adjudication (provisional, system-processed, vitiated by fraud or suppression, or wilful misstatement), sections 73 or 74/74A apply as the case maybe.

This reading gives effect to every provision. It leaves “erroneously refunded” with real work to do, preserves the hierarchy of remedies, and keeps the time limits in section 108,113, 117 from being avoided by the easy device of a fresh notice.

In parting, it would be germane to reiterate Hon’ble SC judgment dated 28.03. 2022 in the case of Ganesh ores Pvt. Ltd., vs State of Odisha (SLP No. 5208 of 2022) where in the order of High Court was not interfered with. The Hon’ble High Court vide its order dated 21.10.2021 (W.P. (C) No. 32488 of 2021) ruled that Section 74 of Central Goods and Services Tax Act, 2017 contains no stipulation that a demand of erroneous refund must be preceded by resort to the appeal procedure against the order granting the refund even where the refund was granted after adjudication.

As observed in the IMF report, burdensome regulatory requirement, still pose significant impediments to trade. Though that observation relates to the cross-border trade/FDI, it is no less important that the tax laws be predictable. Viewed in this context, the aforesaid ruling that the Section 74 can be invoked even after adjudication of the refund seems to create unpredictability and dilute the principle of canon of certainty.

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Views expressed are personal.

Indravijaysinh Solanki, Superintendent of Central Tax, presently posted at Office of the Chief Commissioner, Vadodara Zone, Vadodara.