The exporter gave the IMEI numbers of 3,697 phones. The manufacturer's records did not place it anywhere in the supply chain

A Rs 3.15 crore IGST refund had been sanctioned on appeal and then withheld. Justices Anil Kshetarpal and Shail Jain hold that Section 54(11) rests on two cumulative limbs, and that an ongoing investigation is not the same thing as a show cause notice.

An exporter of mobile phones and electronics that won five refund appeals and then found its money withheld has lost its challenge in the Delhi High Court. Justices Anil Kshetarpal and Shail Jain held that Section 54(11) of the Central Goods and Services Tax Act, 2017 turns on two cumulative requirements, and that the Commissioner here had satisfied both — an anti-evasion investigation was already running when he passed his order, and he had material of fraud before him rather than a mere apprehension. The judgment distinguishes a line of Delhi decisions that had barred the Revenue from withholding refunds on the strength of a contemplated appeal alone.

Five refunds, allowed and then frozen

The petitioner exports microphones, telephone sets, smartphones, monitors, projectors and automatic data processing machines. Between November 2023 and January 2024 it exported goods on payment of integrated tax and filed five refund applications, for amounts ranging from Rs 33,59,544 to Rs 1,35,69,527, aggregating Rs 3,15,30,605.

All five were rejected by Orders-in-Original between March and June 2024, primarily for non-submission of complete documents. The petitioner appealed, placing on record screenshots from the GST portal to show what had been uploaded with each application. By an Order-in-Appeal of 19 June 2024, the Appellate Authority allowed all five appeals, holding that the refunds had been rejected without appreciating the petitioner's submissions.

Four days later the competent authority reviewed that order and opined that it should be challenged before the Goods and Services Tax Appellate Tribunal under Section 112(3) read with Rule 111(1) — recording that an appeal would be filed once the Tribunal became functional. That qualification is the awkward part of the Revenue's position, and the petitioner built on it: an appellate order in its favour was being held in abeyance on the strength of an appeal that could not yet be filed anywhere. The petitioner meanwhile filed a consolidated refund claim on 25 June 2024.

It also disputed whether the Revenue's later reliance on the Tribunal appeal established anything, arguing that an acknowledgement of filing does not by itself show a duly instituted and genuinely pursued appeal rather than one filed as a formality, and that an unadjudicated show cause notice cannot be placed on the same footing as a quasi-judicial order passed in its favour or used to keep the rights flowing from that order indefinitely in abeyance.

The claim was then examined under Section 54(11). Three hearing dates were offered, and on 24 September 2024 the Commissioner withheld the refund. The appeal before the Tribunal was eventually filed on 10 April 2026.

Two limbs, not one

Section 54(11) permits the Commissioner, where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under the Act are pending, and where he is of the opinion that grant of the refund is likely to adversely affect the revenue in those proceedings on account of malfeasance or fraud committed, to withhold the refund after giving the taxable person a hearing.

The Bench read that as two distinct and cumulative ingredients. First, the order must be the subject of an appeal, or further proceedings, or any other pending proceedings under the Act. Second, the Commissioner must independently form an opinion, after a hearing, that granting the refund at that stage is likely to adversely affect revenue on account of malfeasance or fraud.

On the first ingredient the judgment makes a point about drafting. The width of the phrase “any other proceedings under this Act is pending” is deliberate. It is not confined to a formally instituted appeal; it takes in any proceeding, of whatever nature, arising under the Act which has a bearing on the correctness or finality of the order from which the refund flows. Section 54(11) is a self-contained statutory safeguard for the protection of revenue, operating independently of any separate stay granted by a court or tribunal.

Why the earlier Delhi cases did not apply

The petitioner's best material was Mandy Enterprises v. Deputy Commissioner and Alex Tour & Travel v. Assistant Commissioner CGST. The Bench accepted the principle both lay down: the Revenue cannot withhold a refund sanctioned by the Appellate Authority merely on the strength of a proposed or contemplated appeal unaccompanied by any stay, and a mere decision to file an appeal cannot place a valid appellate order in abeyance.

It then identified what those cases actually turned on. In each, the Revenue's case rested only on the first limb of Section 54(11) — a proposed appeal — with no independent material of malfeasance or fraud placed before the Court to justify an opinion under the second limb. That is the distinction, and it is what separates them from this case.

Here, a case concerning the petitioner had been received by the Anti-Evasion Wing of the Delhi South Commissionerate on 26 March 2024 — nearly three months before the Order-in-Appeal of 19 June 2024 and roughly six months before the order withholding the refund.

What the investigation had found by then

The record before the Commissioner, later crystallised in a show cause notice issued in August 2026 quantifying allegedly inadmissible input tax credit of Rs 6,53,08,612, had three strands.

Six of the petitioner's suppliers were reported non-existent or non-operational at their registered principal places of business. A State Tax Office in Kanpur reported one as a bogus entity engaged in availing and passing on fraudulent credit without actual receipt or supply of goods. Another, a Delhi-based company, was found non-existent on physical verification at its registered address in Greater Kailash-I, where the owner of the premises stated it had never been rented to that firm and produced a panchnama recorded earlier by officers of the Directorate General of GST Intelligence. A Kanpur trader was found with no business activity and no stock, its registration reflecting as cancelled suo motu. A Faridabad supplier was likewise reported non-existent.

Second, independent verification of the e-way bills with the transporters produced categorical denials. Vehicle owners whose vehicles appeared in the bills stated under Section 70 that they had not transported the goods, and some said they had no knowledge of the petitioner or the suppliers named. Some summonses to vehicle owners were returned.

Third, and most direct, the investigation asked the petitioner for documents supporting the exports, including the IMEI numbers of the phones exported. The petitioner furnished details of 3,697 mobile phones stated to be iPhones with their IMEI numbers. Those numbers were put to Apple India, which supplied details for 3,623 of them. All had been sold by the manufacturer in business-to-business transactions to nine different companies, and information received from seven of those companies indicated that the petitioner did not appear anywhere in the supply chain of the phones it claimed to have purchased and exported.

The Commissioner had not acted on apprehension. He examined the supply chain tier by tier — the first, second and third-level suppliers — and their status on the GST portal, several of which showed as cancelled suo motu. He then set out Section 16(2) and held that mere issuance of a tax invoice is not enough for availing credit: all four conditions must be met, including the requirement in clause (b) that the recipient has actually received the goods. On that material, the Bench held, he was entitled to conclude that the requirement was not satisfied and to pass the order he did.

The three arguments on the order itself

The petitioner argued that on 24 September 2024 no appeal was pending before the Tribunal, the appeal having been filed only in April 2026, and that mere contemplation of an appeal cannot satisfy the first limb. The Bench held that the contention, even if accepted, does not conclude the matter, because the order was not founded on the first limb alone. The second limb — pendency of other proceedings coupled with the Commissioner's opinion of fraud — was invoked on the basis of an investigation that had commenced by March 2024.

It next argued that a show cause notice issued in 2026 could not constitute a proceeding pending in September 2024. That, the Bench held, overlooks the distinction between the pendency of an investigation and the subsequent issuance of a notice. The notice crystallised allegations arising from an investigation already in progress, and the impugned order itself recorded that the anti-evasion investigation was still under process on the date it was passed.

The third argument was structural: that the Commissioner had acted in an administrative capacity, that he was therefore not an “Adjudicating Authority” as defined, and that no appeal lay under Section 107. The Bench did not need long on it. Section 54(11) expressly confers the power to withhold a refund on the Commissioner, and that power is distinct from the adjudicatory mechanism under Sections 73 and 74 and from the appellate remedy under Section 107. The absence of an appeal under Section 107 does not exclude judicial review under Article 226 — which is how the petitioner was before the Court at all.

Order

Because an appeal against the impugned order already stands filed before the Tribunal, the Bench held it neither appropriate nor necessary, in writ jurisdiction, to adjudicate the disputed questions about the genuineness of the suppliers, the actual movement of the goods, or the correctness of the findings in the impugned order and the show cause notice.

The challenge to the order withholding the refund could not be sustained. The material on record disclosed that an anti-evasion investigation was already pending when the order was passed and that the Commissioner had formed the requisite opinion of fraud or malfeasance on contemporaneous material.

The petition was dismissed, with liberty to the petitioner to agitate all further issues, including those concerning Section 54(11), before the Tribunal — which is to consider them uninfluenced by any observation made in this judgment.