Section 54 of the CGST Act, 2017 – Refund –- The petitioner sought refund of amounts lying in his electronic cash ledger, which has been frozen. During interrogation a letter dated 31.08.2021 was extracted to make it seem as if on the petitioner’s request, one of the customer was to remit amounts due to the petitioner as outstanding to be directly paid into the petitioner’s aforesaid GSTN Account. The counsel for the petitioner submitted that by forcing the customer to directly remit the amount into the petitioner’s GSTN account without issue of SCN was without authority of law. Section 79 of the Act provide recovery mechanism similar to section 11 of the Central Excise Act, 1944, Section 87 of the Finance Act, 1994. The counsel for the respondent submitted that the department has unearth fraud of approximately Rs.11.80 Crores on the strength of fictitious invoices. Pursuant to the letter of the proprietor of the petitioner, a notice was issued to the petitioner’s customer, to remit the amount directly to the aforesaid GSTN account of the petitioner. A proper notice in GST DRC – 13 was issued to the said customer under Section 79 (1) (c). The court observed that the figures regarding the alleged evasion of tax liability on the strength of bogus invoice is mind-boggling and shows inherent weakness in the system. The respondent has to strengthen Rules and plug the loop holes. Even if the respondent has forced the petitioner’s client to pay the tax directly into the petitioner’s Electronic Liability Register, the amount has not been appropriated or debited towards tax, interest, penalty, late fee or any other amount. The amount lying in the Electronic Liability Register of the petitioner can be refunded only the manner in the law. It can however be utilised by the petitioner for discharging tax liability against future supplies. As the amount has not been debited and since it has not been appropriated so far, there is no scope for granting any relief to the petitioner.

Held that:- The Hon’ble High Court dismissed the writ Petition. Directed the respondent to complete investigation within 3 months and to issue appropriate SCN under Section 73 or 74 of the Act. Refund of amount will be subject to the final outcome of the show cause proceedings and in accordance with Section 54 of the Act.