2021 (12) TMI 227 - HC - GST

Rejection of refund of unutilized compensation cess - Section 54 of the CGST Act read with Section 16 of the IGST Act read with Rule 89 of the CGST Rules - HELD THAT - It is to be noticed that the petitioners preferred the refund claims. It emerges that the petitioner no.1 preferred refund claim of unutilized compensation cess for the period from July, 2019 to September, 2019 on account of the export and supply of goods to the SEZ and such refund applications were made on 03.02.2020. It is not disputed that the same had been received by the Assistant Commissioner, Division-4, Surat. The acknowledgment also had been received on 19.02.2020 of the receipt of such refund applications. As rightly pointed out by the petitioners, the only ground assigned for proposing the rejection of the claim for refund is the others with a remark that error in adjusted total turnover. It is surely and rightly has been termed as a show cause notice which is completely vague and lacks the fundamental details which otherwise is required to be given for anyone to comprehend the same. A notice since is a foundation of any proceedings and if the same is not clear and is vague, the very edifice is extremely weak and based on such hollow foundation, when an attempt is made to raise a superstructure, the same cannot be sustained. Not only the show cause notice lacks the clarity and requisite material necessary to meet with the same, the order impugned is also in clear violation of the settled cannon of law. Lack of reasons in the show cause notices has not enabled the parties to make an effective representation and file the reply nor would the grant of personal hearing for contesting such show cause notices would sub-serve the purpose. The order of rejection also is a non-speaking order and the same had been passed without bearing in mind requirements of giving any reasons for rejection. Matter restored back.

Summary

Issues:
1. Challenge to show cause notices and orders for refund rejection without reasons.
2. Invocation of writ jurisdiction under Article 226 of the Constitution of India.
3. Refund claim for unutilized compensation cess under CGST Act and IGST Act.
4. Lack of clarity in show cause notices and orders for rejection.
5. Violation of principles of natural justice and statutory requirements.

Issue 1: Challenge to show cause notices and orders for refund rejection without reasons

The petitioners sought the quashing of show cause notices dated 04.03.2020 and 11.03.2020, alleging that they were issued without reasons for proposing the rejection of their refund claims. The petitioners also contested the orders dated 23.03.2020, which were issued without providing any opportunity for a personal hearing or assigning reasons. The prayers included the issuance of writs of certiorari and mandamus under Article 226 of the Constitution of India to set aside the impugned notices and orders.

Issue 2: Invocation of writ jurisdiction under Article 226 of the Constitution of India

The petitioners, an integrated steel manufacturer, filed refund applications for unutilized compensation cess under the CGST Act and IGST Act. The show cause notices issued lacked clarity and specified the ground for rejection as "other," leading to confusion and inability to respond effectively. The respondent argued that the statutory remedy should have been pursued instead of invoking writ jurisdiction, citing the decision of the Apex Court in a relevant case.

Issue 3: Refund claim for unutilized compensation cess under CGST Act and IGST Act

The petitioners' refund claims were related to the export and supply of goods to the Special Economic Zone (SEZ). The applications for refund were made in early 2020, and acknowledgments were received. However, subsequent show cause notices lacked specific reasons for rejection, hindering the petitioners' ability to provide a suitable reply or attend the personal hearing.

Issue 4: Lack of clarity in show cause notices and orders for rejection

The show cause notices and subsequent orders for rejection were criticized for lacking essential details and clarity. The notices mentioned the reason for rejection as "other" without specifying the grounds, making it challenging for the petitioners to understand and respond adequately. The orders of rejection were termed as non-speaking orders, passed without providing reasons, violating principles of natural justice.

Issue 5: Violation of principles of natural justice and statutory requirements

The High Court found the entire process of rejecting the refund claim to be in violation of natural justice principles and statutory requirements. The lack of reasons in the show cause notices and non-speaking orders for rejection were deemed arbitrary and against established legal principles. The Court intervened by quashing the impugned orders and directing a reevaluation of the refund claims with proper adherence to procedural fairness.

This detailed analysis of the judgment addresses all the issues involved comprehensively, highlighting the key legal aspects and findings of the High Court.