2023 (3) TMI 110 - HC - GST

Refund of GST paid - Non-supply of service - lease rentals on account of assessment/provisional assessment/appeal/any other order for the period of 01.07.2017 to 30.07.2018 - impugned order was passed in violation of principles of natural justice or not - failure on the part of Appellate Authority to appreciate that the lease was nullified in terms of the resolution plan. HELD THAT - It is important to note that the SCN dated 11.01.2021 had proposed rejection of the petitioner s application on the premise that the lease of the property was required to be considered as supply of the services and the same were required to be valued in terms of Section 15 of the CGST Act. The Adjudicating Authority had reasoned that there was no specific exclusion under Section 15 of the CGST Act from the value of the supply in respect of non-recovery of payments of bad debts . Thus, according to the Adjudicating Authority, the fact that the petitioner had not recovered the lease rentals on which GST had been paid, it did not entitle it to any refund because a liability to pay GST would not stand extinguished on that ground. It is clear that the Appellate Authority had granted sufficient opportunity of personal hearing to the petitioner but the petitioner had failed to avail the same. The assumption that the Appellate Authority was bound to accede to repeated request for adjournment is erroneous. The contention that the impugned order has been passed in violation of principles of natural justice is bereft of any merit. Whether the petitioner was liable to pay GST in respect of the lease of the property in view of the resolution plan terminating all agreements/arrangements between BSL and other related parties? - HELD THAT - There is no dispute that the resolution plan was sanctioned by the National Company Law Tribunal and is binding. It is the petitioner s contention that, in terms of the sanctioned plan, the Memorandum of Agreement for Lease dated 01.04.2015 was terminated without any liability on the part of BSL to pay or make any payment - The entire transaction of lease was brought into question and was terminated under the resolution plan. Thus, according to the petitioner, there was no supply of services. This contention has not been considered by the Appellate Authority. The impugned order largely proceeds on the basis that the supply of services was admitted and the refund of GST was sought on account of non-recovery of the lease rentals. The impugned order is set aside and matter remanded to the Appellate Authority to consider the aforesaid contention and pass a speaking order after affording the petitioner a reasonable opportunity to be heard - petition disposed off.

Summary

Issues:
1. Impugning an Order-in-Appeal rejecting refund under Section 54 of CGST Act.
2. Violation of principles of natural justice in passing the impugned order.
3. Failure to appreciate lease nullification under the resolution plan.

Analysis:
1. The petitioner challenged an Order-in-Appeal dismissing their appeal against the rejection of a refund application under Section 54 of the CGST Act. The Adjudicating Authority rejected the refund claim based on the premise that the lease of the property should be considered a supply of services under Section 15 of the CGST Act. The Authority reasoned that non-recovery of lease rentals did not extinguish the GST liability, leading to the rejection of the refund application.

2. The petitioner contended that the impugned order violated principles of natural justice. The Appellate Authority provided ample opportunities for a personal hearing, but the petitioner failed to appear, requesting multiple adjournments. The court found that the Appellate Authority had granted sufficient opportunities, and the contention of violation of natural justice was baseless.

3. The key issue revolved around whether the petitioner was liable to pay GST for the lease of the property post-resolution plan termination. The resolution plan terminated all agreements with related parties, including the lease agreement. The petitioner argued that as a related party transaction, the lease was nullified, and no services were supplied. The court noted that this crucial aspect was not adequately considered by the Appellate Authority. Consequently, the court set aside the impugned order, remanding the matter to the Appellate Authority for a fresh decision after considering the petitioner's contentions and granting a reasonable opportunity for a hearing.

This comprehensive analysis of the judgment delves into the core issues raised by the petitioner, including the rejection of the refund application, violation of natural justice, and the impact of the resolution plan on the lease agreement. The court's decision to remand the matter for further consideration highlights the importance of addressing all relevant legal aspects before reaching a final decision.