Refund cannot be rejected basis previous years ineligible ITC without any outstanding demand

Case Background: In the case of Stanlee (India) Enterprises Pvt. Ltd. vs. The Commissioner of CGST, the petitioner sought a refund of Integrated Goods and Services Tax (IGST) related to exports for the year 2024, but the GST department rejected the application, citing excess Input Tax Credit (ITC) claimed in the financial year 2019-20 without issuing a Show Cause Notice (SCN).
High Court Findings: The Delhi High Court ruled that the GST department must issue an SCN under Section 73 or 74 of the CGST Act in cases of excess ITC claims. Citing the Supreme Court’s decision in Armour Security (India) Ltd., the court emphasized that an SCN is a mandatory prerequisite for any recovery demand under GST.
Court’s Directive: The High Court determined that the alleged excess ITC from previous years could not justify the withholding of the IGST refund. Consequently, the court ordered the GST department to process the full refund of IGST to Stanlee (India) Enterprises along with applicable statutory interest.