2023 (12) TMI 663 - HC - GST

Refund of tax paid on export of services - rejection of application for refund on the ground that there is no nexus between input and output supply - adequate opportunity to file the documents not provided to petitioner - violation of principles of natural justice - HELD THAT - There appears to be an apparent violation of the principle of natural justice, inasmuch as the Order in Original was passed dated 30th December 2021 was passed without giving the petitioner adequate opportunity to file the documents which the petitioner had uploaded on 17th January 2022 by which time the Order in Original was already passed. The Order in Original dated 30th December 2021 does not contain any reason for rejection of the refund application. The Order in Appeal relies on Rule 89 of the CGST Rules which is not part of the show cause notice nor the same was put forth to the petitioner. Furthermore, the Appellate Authority had not called for the details on the basis of which he has rejected the appeal. In the interest of justice, the Order in Original dated 30th December 2021 and Order in Appeal dated 4th May, 2022 is required to be set aside on the ground of the same being passed without considering such material - refund application is restored to the file of respondent no. 3 for fresh adjudication.

Summary

Issues involved:
The issues involved in the judgment are the challenge against the Order-In-Original (O-I-O) rejecting a refund application and the Order-In-Appeal (O-I-A) dismissing the appeal against the refund rejection.

Challenge against Order-In-Original (O-I-O):
The petitioner filed a refund application for tax paid on export of services, which was later rejected by the respondents citing lack of nexus between input and output supply. The petitioner contended that no nexus is required to claim input credit, only that the input tax should be used in the course of business. The Order in Original rejecting the refund did not provide any reason for the rejection. The petitioner argued that the order was passed hastily without considering documents uploaded later. The High Court observed a violation of natural justice as the order was passed without giving adequate opportunity to submit documents. The court quashed the O-I-O and directed fresh adjudication of the refund application.

Challenge against Order-In-Appeal (O-I-A):
The petitioner appealed the O-I-O rejection, but the Appellate Authority dismissed the appeal citing non-provision of invoices of the exports among other documents, relying on Rule 89 of the Central Goods and Services Tax Rules, 2017. The petitioner argued that the Appellate Authority did not call for any explanation on which the appeal was rejected, and the reasons for rejection were not part of the O-I-O. The High Court found a lack of consideration of material issues and violation of natural justice. Consequently, the court set aside the O-I-A and directed the restoration of the refund application for fresh adjudication.

Court's Decision:
The High Court noted the violation of natural justice in passing both the O-I-O and O-I-A without proper consideration of relevant documents and reasons for rejection. The court quashed both orders and directed the respondent to give a notice of hearing to the petitioner for explanation on the grounds of refund rejection. The respondent was instructed to pass a speaking order on the refund application within four months from the date of the petitioner's hearing. The court disposed of the writ petition with no order as to costs, keeping all contentions of the parties open.