Quick answer: In M/s. ADV Industrial Services Private Limited v. Union of India, decided on 8 September 2026, a Division Bench of the Telangana High Court (Aparesh Kumar Singh, CJ, and G.M. Mohiuddin, J.) quashed an order rejecting a Rs. 19,33,34,320 GST refund claim that was consequential to an Order-in-Appeal setting aside the underlying input tax credit demand. The refund authority had refused to give effect to the Order-in-Appeal on the ground that the Department’s “competent authority” had reviewed it, found it “not legal and proper”, and decided to appeal to the GST Appellate Tribunal — an appeal that, on the date of the refund rejection, had not even been filed. The Court held that under Section 107(16) of the Central Goods and Services Tax Act, 2017, an appellate order remains final and binding until actually modified, stayed or set aside, and that a refund arising from such an order can be withheld pending further proceedings only by strict compliance with Section 54(11), including a recorded Commissioner’s opinion on malfeasance or fraud and an opportunity of hearing — neither of which had been afforded here. The matter was remanded for fresh, reasoned disposal within four weeks.
Key Takeaways
- An Order-in-Appeal binds subordinate GST authorities from the date it is passed, not from the date it becomes unchallengeable. Section 107(16) of the CGST Act makes an appellate order final and binding “subject to” Sections 108, 113, 117 and 118 — meaning it operates immediately and continuously unless and until one of those provisions is actually invoked to modify, stay or set it aside. A Department’s internal review finding the order “not legal and proper,” without more, changes nothing.
- The only lawful route to withholding a refund pending a departmental appeal is Section 54(11), and it has teeth. The provision requires an appeal or other proceeding to actually be pending, a Commissioner’s opinion that the refund would adversely affect revenue on account of malfeasance or fraud, and a hearing before the refund is withheld. A refund officer cannot achieve the same result under Section 54(8) by simply declaring the appellate order not yet “final.”
- A refund proceeding cannot be used to reopen the substantive ITC eligibility question already decided on appeal. The refund authority here relied on depreciation schedules suggesting the warehouse construction had been capitalised as immovable property — material going to the Section 17(5)(d) question the appellate authority had already resolved in the assessee’s favour. The Court treated this as an impermissible collateral attack on a binding appellate finding, not a legitimate exercise of independent refund scrutiny.
- A subordinate appellate remedy is not “efficacious” where the officer who would hear it reports to the same authority that has already prejudged the case. The writ petition was entertained despite Section 107 providing a nominal further appeal, because that appeal would go to an officer subordinate to the Principal Commissioner who had already directed the challenge to the Order-in-Appeal — an illustration of when the alternative-remedy bar in Commercial Steel gives way.
- The judgment does not revisit the underlying Section 17(5) blocked-credit question. The Court’s holding is confined to the binding effect of the Order-in-Appeal and the refund-withholding mechanism; the merits of when construction for leasing escapes the “own account” restriction under Section 17(5)(d), as applied by the appellate authority relying on Safari Retreats and Bharti Airtel, were not before this Bench and were not disturbed or re-examined.
1. Introduction
A recurring friction point in GST administration arises after an assessee wins at the first appellate stage: the Order-in-Original is set aside, the demand disappears, and the assessee applies for consequential refund of whatever it paid or had appropriated toward that demand — only to have the refund officer refuse to act because the Department is unhappy with the appellate outcome and intends to challenge it further. The Telangana High Court’s judgment of 8 September 2026 in M/s. ADV Industrial Services Private Limited v. Union of India addresses exactly this pattern, and does so with a firm answer: an appellate order under Section 107 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) is final and binding on the parties unless and until it is actually reversed through the statutory channels the Act itself prescribes, and a Department that wishes to freeze the consequences of an adverse appellate order pending its own challenge must use the specific withholding mechanism in Section 54(11), not simply decline to implement the order.
The dispute arose from a Rs. 19.33 crore input tax credit demand connected with the construction of pre-fabricated warehouses, which an appellate authority had already set aside by applying the Supreme Court’s reasoning in Safari Retreats on the “own account” limb of the blocked-credit provision, Section 17(5)(d). When the petitioner sought the resulting refund, however, the refund authority rejected the claim on the footing that the Order-in-Appeal was not yet final because the Department had decided, internally, to appeal it to the GST Appellate Tribunal (GSTAT) — before any such appeal had actually been filed.
This article sets out the transaction and procedural history, the Court’s reasoning on the binding effect of appellate orders and the scope of Section 54(11), the authorities it applied, and the consequences for GST compliance and litigation strategy, particularly for assessees who have won an appeal but face administrative resistance to implementing it.
2. Case summary and background
2.1 The transaction and the demand
The petitioner, M/s. ADV Industrial Services Private Limited, is a company registered under the CGST Act engaged in renting and leasing pre-fabricated warehouse buildings to its clients, and had been filing GST returns from 2017-18 to 2021-22. An investigation by the Directorate General of GST Intelligence (“DGGI”), Hyderabad Zonal Unit, culminated in a summons under Section 70 of the CGST Act on 16 September 2022 concerning input tax credit allegedly availed in contravention of Section 17 of the Act. The DGGI alleged that the petitioner had availed ineligible input tax credit of Rs. 19,33,34,320 in respect of works contract services received for constructing the warehouses, treating the credit as blocked under Section 17(5) of the CGST Act. Under protest, the petitioner reversed Rs. 15,99,60,570 from its unutilised electronic credit ledger and paid a further Rs. 3,33,73,750 in cash, both through Form GST DRC-03.
2.2 The demand, the successful appeal, and the refund claim
A show cause notice dated 15 December 2023 was issued under Section 74 of the CGST Act. Order-in-Original No. 75/2024-25-Adjn(ADC)-GST, dated 13 September 2024, confirmed the demand of Rs. 19,33,34,320 with interest and penalty and appropriated the amounts already paid. On appeal (Appeal No. 80/2024-RR-GST-Comm), the appellate authority passed Order-in-Appeal No. HYD-GST-RRC-APP1-41-2025-26 on 16 September 2025, allowing the appeal in full and setting aside the Order-in-Original. That order examined Section 17(5)(c) and (d) in detail: relying on the Supreme Court’s decision in Chief Commissioner of Central Goods and Service Tax and others v. Safari Retreats Private Limited and others, (2025) 2 SCC 523, it held that construction intended to be leased or licensed out could not be treated as construction on the assessee’s “own account” within Section 17(5)(d); applying the functional test from Bharti Airtel Limited v. Commissioner of Central Excise, Pune, 2025 (391) ELT 3 (S.C.) — annexation, object, intention, functionality, permanency and marketability — it found the superstructure and Kirby steel to be movable property outside the restriction altogether; and, for components it did treat as immovable (sub-structure, wall, dock area, flooring, apron), it held Section 17(5)(d) still did not apply because the construction was for leasing rather than the assessee’s own account.
The petitioner then filed a refund application in Form GST-RFD-01 on 28 October 2025, acknowledged on 11 November 2025. After two successive notices seeking further material (5 and 24 December 2025, the second raising additional grounds), the refund authority passed a Refund Rejection Order in Form GST-RFD-06 on 12 January 2026, ARN AA361025043086J, rejecting the claim in its entirety. The rejection order recorded that the Department’s “competent authority” had reviewed the Order-in-Appeal, found it “not legal and proper,” and decided to appeal to the GSTAT — an appeal the Department in fact filed only on 25 March 2026, more than two months after the refund was rejected. The rejection order also invoked the petitioner’s capitalisation of the warehouse expenditure as “Building” in its books, with depreciation claimed under the Income Tax Act, as a ground for doubting the refund claim independently of the appellate findings.
2.3 The writ petition and the holding
The petitioner challenged the rejection under Article 226, notwithstanding the availability of a further statutory appeal under Section 107. The Division Bench held that the Order-in-Appeal remained operative and binding as of 12 January 2026 because no order under Sections 108, 113, 117 or 118 had modified, stayed or set it aside, and the Department’s own GSTAT appeal was filed only afterwards; that the refund authority had no power to treat an internal decision to appeal as equivalent to a stay; that any withholding of a refund pending further proceedings had to satisfy Section 54(11), which was not attempted; and that the writ was maintainable because the nominal statutory appeal lay to an officer subordinate to the very authority that had already prejudged the matter. The impugned order was quashed and the refund application remanded for a fresh, reasoned decision within four weeks, subject to the Department’s right to invoke Section 54(11) properly if it wished to withhold payment.
3. Legal analysis
3.1 The binding effect of an Order-in-Appeal under Section 107(16)
The Court’s central holding rests on a plain reading of Section 107(16) of the CGST Act, reproduced in the judgment as follows: “(16) Every order passed under this section shall, subject to the provisions of Section 108 or Section 113 or Section 117 or Section 118 be final and binding on the parties.” The Bench reasoned that this makes an appellate order binding from the moment it is passed, and that the qualifying phrase “subject to” the further-remedy provisions does not suspend that binding character in advance of an actual invocation of those remedies — it merely acknowledges that the order can later be superseded if a competent forum modifies, stays or sets it aside. On the facts, as of 12 January 2026 (the date of the refund rejection), no such superseding order existed: the GSTAT appeal was filed only on 25 March 2026, over two months later. The Court was explicit that “the subsequent filing of an appeal before the GSTAT, does not retrospectively render the Order-in-Appeal inoperative as on the date when the impugned order was passed” — a straightforward but important point, since a Department wishing to resist a refund cannot backdate the legal effect of a later-filed appeal.
The Court characterised the refund authority’s reliance on paragraph 11.4 of its own order — that the Order-in-Appeal “has not attained the finality inasmuch as the competent authority has reviewed the same, found it not legal and proper and decided to file an appeal” — as a conflation of an internal administrative view with an actual legal supersession. An opinion that an order is wrong, however senior the official forming it, is not itself a stay; only the mechanisms the statute specifies (Sections 108, 113, 117, 118, or a competent court) can suspend or reverse a binding order.
3.2 Judicial discipline: two Supreme Court authorities applied
To reinforce this conclusion, the Court invoked the established doctrine of judicial discipline through two authorities it treated as directly applicable to the facts. First, Union of India v. Kamalakshi Finance Corporation Ltd., 1992 Supp (1) SCC 443, which the Bench read as holding, in substance, that orders of higher appellate authorities bind subordinate authorities and cannot be disregarded merely because the Department considers them erroneous, and that the Department’s remedy lies in pursuing its own statutory appeal rather than in permitting subordinate officers to act contrary to a binding order in the meantime. Second, M/s Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority & others, (2025) 11 SCC 808, quoted directly in the judgment: “Once the issue stands finally concluded, the decision binds the State, a fortiori, the Revisional Authority. The decision of the Tribunal may not be acceptable to the Revisional Authority, but that cannot furnish any ground to such authority to perceive that it is either not bound by the same or that it need not be followed.” Both authorities were applied, not merely cited as background, to hold that the refund officer — functionally a subordinate implementing authority for this purpose — had no license to treat the appellate order as less than binding because a superior officer disagreed with it.
3.3 Section 54(11) as the exclusive mechanism for withholding a consequential refund
The judgment’s most operationally significant holding concerns Section 54(11) of the CGST Act, which the Court reproduced in full: it permits withholding a refund where the order giving rise to it “is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending,” provided the Commissioner forms an opinion that granting the refund would adversely affect revenue “on account of malfeasance or fraud committed,” and only “after giving the taxable person an opportunity of being heard.” The Court found each of the three preconditions absent as of the rejection date: no appeal was in fact pending (the GSTAT appeal came only in March 2026); the rejection order recorded no Commissioner’s opinion of malfeasance or fraud, only a general apprehension about revenue effect; and the petitioner was never given a hearing directed at withholding the refund on this ground. The Bench held that the refund authority could not achieve indirectly, through an outright rejection under Section 54(8), what Section 54(11) permits only through a specific and safeguarded procedure. This is a clean statement of principle: a general power to process refunds does not include a specific power to withhold them for revenue-protection reasons where Parliament has enacted a dedicated provision with its own conditions.
3.4 The refund proceeding is not a venue to relitigate ITC eligibility
The Department also relied on depreciation schedules and accounting treatment suggesting the warehouse expenditure had been capitalised as “Building,” arguably supporting a different view of the Section 17(5)(d) “own account” question than the one the appellate authority had reached. The Court treated this as an impermissible attempt to reopen, through the refund process, a substantive question of ITC eligibility that the appellate authority had already decided in the petitioner’s favour. If the Department considered that this material warranted a different outcome, its remedy was to place that material before the GSTAT in its own appeal — not to have the refund officer act as a second-guessing tribunal. This holding matters because it draws a clear jurisdictional line between the refund sanctioning function under Section 54 and the adjudicatory function exercised on appeal: the former administers the consequences of a determination already made; it does not remake the determination.
3.5 Alternative remedy and Article 226
The Department argued, citing Assistant Commissioner of State Tax & Others v. Commercial Steel Limited, (2021) 13 SCC 1, that the petitioner should have pursued the further statutory appeal under Section 107 rather than invoking writ jurisdiction. The Court accepted the general principle that an alternative remedy is not an absolute bar but recognised exceptions — including want of jurisdiction, breach of natural justice, and an inefficacious remedy — and found the case fell within them for a specific structural reason: the appeal against the refund rejection would lie to an officer subordinate to the Principal Commissioner, who had himself already directed that the Order-in-Appeal be challenged. Relegating the petitioner to that forum, the Bench held, would make the “alternative” remedy illusory in substance, since the deciding officer would be answerable to the very authority that had prejudged the outcome. This is a fact-specific application of the alternative-remedy exception rather than a general departure from Commercial Steel, and practitioners should not read it as opening writ jurisdiction to every GST appeal merely because a superior officer has an adverse view — the illusoriness here turned on the reporting relationship between the refund appellate officer and the Principal Commissioner who had already acted.
3.6 What the judgment leaves open
The Bench did not revisit or express any independent view on the correctness of the appellate authority’s Section 17(5)(d) analysis, including its reliance on Safari Retreats and the Bharti Airtel functional test for movability — those findings were treated as a binding fait accompli for present purposes, not reopened on their merits. Nor did the Court decide what happens if the Department’s GSTAT appeal, now pending, ultimately succeeds after the refund has already been paid pursuant to the remand; the judgment’s remand direction expressly leaves the Department free to invoke Section 54(11) properly, at which point the pendency requirement would, by then, actually be satisfied. The judgment is therefore best read as a procedural and administrative-law holding on the binding effect of appellate orders and the refund-withholding mechanism, layered on top of, but not substituting for, the substantive ITC question the appellate authority had already resolved.
4. Practical significance
For GST-registered businesses that succeed at the first appellate stage, this judgment provides a concrete template for compelling implementation of a favourable Order-in-Appeal when the refund wing resists on the strength of an unfiled or merely contemplated departmental appeal. Assessees in that position should insist, as the petitioner did here, on the specific statutory question of whether Section 54(11)’s three conditions — actual pendency of an appeal or proceeding, a Commissioner’s recorded opinion of malfeasance or fraud, and a hearing — have been satisfied before any refund is withheld, and should resist any attempt to fold that analysis into a generic Section 54(8) rejection.
For departmental officers and counsel, the judgment is a caution against pre-empting an appeal’s legal effect through the refund process. Where the Department genuinely believes an Order-in-Appeal should not be given immediate effect, the judgment signals that the correct sequence is: file the GSTAT appeal (or other appropriate proceeding) first, then seek the Commissioner’s opinion and afford a hearing under Section 54(11) — not to reject the refund outright and file the appeal only afterwards, and certainly not to treat an internal review finding as a substitute for either step.
On litigation strategy, the case illustrates that the availability of a further departmental appeal will not always foreclose Article 226 relief where the appellate hierarchy itself creates a structural conflict of interest — here, an appeal to an officer answerable to the same Principal Commissioner who had already directed the challenge. Counsel resisting a writ on alternative-remedy grounds should anticipate this line of argument wherever the department’s own internal review has already taken a public position before the “alternative” appellate officer is asked to adjudicate.
Finally, for businesses in the warehousing, leasing, and construction-for-lease sectors, the underlying Order-in-Appeal’s treatment of Section 17(5)(d) — while not itself re-examined by this Bench — remains instructive persuasive material on how Safari Retreats and the Bharti Airtel movability tests were applied to a concrete works-contract fact pattern, even though its correctness will now be tested afresh before the GSTAT in the Department’s pending appeal. Businesses relying on similar reasoning should track that GSTAT proceeding, since its outcome will determine whether the underlying ITC position, as distinct from the refund-mechanics holding reported here, ultimately survives.
5. Conclusion
The Telangana High Court’s judgment supplies a precise and practically important answer to a problem that recurs across GST administration: what happens when an assessee wins at the appellate stage but the refund wing will not act on the win because the Department is unhappy with the result. The answer is that Section 107(16) makes the appellate order binding in the interim, that only Section 54(11) — with its three conditions of actual pendency, a Commissioner’s opinion on malfeasance or fraud, and a hearing — permits withholding the resulting refund, and that a refund officer cannot use the occasion to relitigate a substantive ITC question the appellate authority has already decided. None of this disturbs the underlying Section 17(5)(d) analysis, which will be tested on its own merits before the GSTAT. But for assessees facing administrative resistance to implementing a favourable appellate order, the judgment offers a clear, statute-grounded route to relief.
Authorities
Applied by the Court:
- Union of India v. Kamalakshi Finance Corporation Ltd., 1992 Supp (1) SCC 443 — judicial discipline; subordinate authorities bound by appellate orders pending the Department’s own statutory challenge.
- M/s Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority & Others, (2025) 11 SCC 808 — a concluded decision binds the State and its authorities regardless of a Revisional Authority’s disagreement; alternative remedy not an absolute bar to Article 226 jurisdiction.
Cited by counsel / referenced as background (applied by the appellate authority below, not re-examined by this Bench):
- Chief Commissioner of Central Goods and Service Tax and others v. Safari Retreats Private Limited and others, (2025) 2 SCC 523 — applied by the Order-in-Appeal on the “own account” limb of Section 17(5)(d).
- Bharti Airtel Limited v. Commissioner of Central Excise, Pune, 2025 (391) ELT 3 (S.C.) — applied by the Order-in-Appeal for the functional test of movable versus immovable property.
- Safari Retreats Private Limited v. Chief Commissioner of Central Goods and Service Tax, 2019 SCC OnLine Ori 443 — the Orissa High Court decision the petitioner originally relied on during the departmental investigation, before the Supreme Court’s decision in the same matter.
- Assistant Commissioner of State Tax & Others v. Commercial Steel Limited, (2021) 13 SCC 1 — cited by the respondents for the general rule that an efficacious alternative remedy ordinarily bars writ jurisdiction; distinguished on the facts.
Legislation:
- Central Goods and Services Tax Act, 2017 — Section 17(5)(c) and (d) (blocked credit for works contract services and goods/services for construction of immovable property on own account); Section 54 (refund, including sub-sections (1), (8) and (11)); Section 70 (power to summon); Section 74 (demand for reasons of fraud, wilful misstatement or suppression); Section 107 (appeals to the Appellate Authority, including sub-section (16) on finality); Section 108, 113, 117 and 118 (revisional and further appellate remedies).
- Constitution of India — Article 226 (writ jurisdiction of High Courts).
FAQ
Does this judgment decide whether input tax credit on warehouse construction for leasing is blocked under Section 17(5)(d)? No. That question was decided by the appellate authority below, relying on Safari Retreats and Bharti Airtel, and was not reopened or re-examined by the Telangana High Court in this writ petition, which concerned only the binding effect of that appellate order and the refund-withholding mechanism.
Can a GST department simply decline to refund an amount while it decides whether to appeal an adverse Order-in-Appeal? Not under this judgment. The Court held that an Order-in-Appeal remains binding under Section 107(16) until actually modified, stayed or set aside, and that withholding a consequential refund pending a genuine further appeal requires strict compliance with Section 54(11) — including that the appeal actually be filed, a Commissioner’s recorded opinion on malfeasance or fraud, and a hearing.
Was the underlying GSTAT appeal by the Department decided in this judgment? No. The Department’s appeal to the GST Appellate Tribunal, filed on 25 March 2026, remained pending and was not before the High Court. The writ petition concerned only the legality of the refund rejection order dated 12 January 2026.
This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.