2021 (3) TMI 339 - HC - GST

Refund of unutilized input tax credit - export of service - zero-rated supply - section 16(3) of the IGST Act read with section 54 of the CGST Act and Rule 89 of the Central Goods and Services Tax Rules, 2017 - no hearing granted to petitioner - violation of principles of natural justice - HELD THAT - Section 54 of the CGST Act deals with refund of tax. Sub-section (1) says that any person claiming refund of any tax and interest may make an application before the expiry of two years from the relevant date in the prescribed form and manner. As per sub-section (5), if on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly. In terms of sub-section (7), the proper officer shall issue the order under sub-section (5) within 60 days from the date of receipt of the application, complete in all respects. In a case where the proper officer is satisfied for reasons to be recorded in writing that the whole or any part of the amount claimed as refund is not admissible or is not payable, he shall issue notice to the applicant requiring filing of reply within 15 days of receipt of notice and after considering the reply make an order sanctioning the amount of refund in whole or in part or rejecting the refund claim which order shall be made available to the applicant. As per the proviso, an application for refund shall not be rejected without giving the applicant an opportunity of being heard. Therefore, there is a clear legal mandate that if an application for refund is to be rejected, the same can only be done after giving the applicant an opportunity of being heard. When the law requires that no application for refund shall be rejected without giving an applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for refund where no timelimit is fixed vis-a-vis rejection of claim. Under sub-section (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects (emphasis is ours) without there being a corresponding provision for rejection of application not complete in all respects - Admittedly in this case, no hearing was granted to the petitioner. Impugned orders, therefore, would be in violation of the proviso to subrule (3) of rule 92 of the CGST Rules and also in violation of the principles of natural justice. The matter should be remanded back to the original authority for a fresh decision in accordance with law after giving an opportunity of being heard to the petitioner - Petition allowed by way of remand.

Issues Involved:
1. Legality and correctness of the orders rejecting refund claims.
2. Whether the petitioner was provided an opportunity of being heard.
3. Applicability of the Trade Circular dated 17.03.2020.
4. Maintainability of the writ petition in the presence of an alternative remedy.

Detailed Analysis:

1. Legality and Correctness of the Orders Rejecting Refund Claims:
The petitioner, a company engaged in providing IT and IT-enabled services to customers outside India, challenged five identical orders dated 26.06.2020 rejecting its refund claims for unutilized input tax credit for the period from April 2018 to June 2019. The petitioner argued that the services provided qualify as "export of service" and "zero-rated supply" under sections 2(6) and 16 of the Integrated Goods and Services Tax Act, 2017 (IGST Act). The respondent, however, classified the petitioner as an intermediary under section 2(13) of the IGST Act, contending that the place of supply is India, thus disqualifying the services from being treated as export and making the petitioner ineligible for the refund.

2. Whether the Petitioner was Provided an Opportunity of Being Heard:
The petitioner claimed that it was not given a personal hearing before the rejection of the refund claims, which is a violation of Rule 92(3) of the Central Goods and Services Tax Rules, 2017 (CGST Rules). The respondents argued that the petitioner was given ample opportunity through emails and telephonic conversations, which should be considered as a hearing. The court found that telephonic conversations and email exchanges could not substitute a formal hearing, especially when the law mandates an opportunity of being heard before rejecting a refund application.

3. Applicability of the Trade Circular Dated 17.03.2020:
The respondents relied on the Trade Circular dated 17.03.2020, which allowed for the submission of documents via email due to the pandemic, claiming it provided an opportunity of hearing. The court noted that this circular pertained to time-barring assessments under the Maharashtra Value Added Tax Act, 2002, and was not applicable to refund claims under the GST regime. Therefore, the reliance on this circular to dispense with a personal hearing was misplaced.

4. Maintainability of the Writ Petition in the Presence of an Alternative Remedy:
The respondents contended that the writ petition should be dismissed as the petitioner had an alternative remedy of appeal under section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act). The petitioner argued that the orders were in violation of the principles of natural justice, making the writ petition maintainable. The court held that when an order is passed in violation of natural justice, the availability of an alternative remedy does not bar the invocation of writ jurisdiction. The court cited previous judgments to support this view, emphasizing that a fair trial at the first stage is crucial, and a right to appeal cannot rectify an initial unjust trial.

Conclusion:
The court concluded that the rejection of the refund claims without a proper hearing violated the principles of natural justice and the proviso to Rule 92(3) of the CGST Rules. The impugned orders dated 26.06.2020 were set aside, and the matter was remanded to a new competent officer for fresh consideration within three months, ensuring an opportunity of being heard to the petitioner. All contentions were kept open, and the writ petition was allowed without any order as to cost.

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