2020 (12) TMI 582 - HC - GST

Refund of GST - petitioner submits that on account of inward supply of inverted rated inputs the petitioner was entitled to refund - period April 2018 to July 2018 - HELD THAT - There are no hesitation in holding that in quasi judicial proceedings that too relating to financial adjudication, the proposed reasons for rejection should be specifically contained and informed to the assessee so as to enable him to give his reply in a conclusive and reasonable manner. The perusal of the show cause notice in the present case fall short of all the known principles of natural justice and no prudent man could have given reply to the kind of show cause notice, which was served upon the petitioner. For the sole reason that the order rejecting the claim is based upon a silent show cause notice, there are no hesitation in holding that the principles of natural justice have been violated while adjudication of refund claim of the petitioner. The respondent no. 2 is directed to passed a fresh order on the application of the petitioner, for refund, already filed by the petitioner under Form RFD-01, after supplying all the requisite documents and the ground on which the department proposes to reject the application and after giving an adequate opportunity of hearing to the petitioner in accordance with law - petition allowed.

Summary

Issues:
Challenge to rejection of refund application under GST Act due to lack of tribunal, violation of natural justice in show cause notice, rejection of appeal for failure to submit documents.

Analysis:
The petitioner, a registered supplier under the GST Act, filed a refund application for &8377; 13,68,758 under inverted duty structure for the period April 2018 to July 2018. The respondent issued a show cause notice for rejection due to unspecified reasons. The petitioner couldn't respond due to lockdown, but the refund was rejected without a hearing. The rejection order lacked reasons and wasn't uploaded on the portal. The petitioner, after being informed by the Help Desk, submitted a reply with supporting documents, which were accepted due to the absence of the rejection document. The respondent later handed over the rejection order without specifying reasons.

The petitioner challenged the rejection order by filing an appeal, which was dismissed for not submitting documents. The petitioner argued that all documents were submitted with the initial application and cited a Supreme Court judgment emphasizing the importance of clear charges in a show cause notice. The respondent justified the rejection based on the absence of documents and defended the appellate order.

The court held that in financial adjudication proceedings, specific reasons for rejection must be communicated to enable a proper response. The show cause notice in this case lacked clarity and violated principles of natural justice. Consequently, the rejection order and the appellate order were set aside. The respondent was directed to issue a fresh order after providing all necessary documents, specifying grounds for rejection, and granting a fair hearing to the petitioner. The decision was to be made promptly, preferably within three months.

In conclusion, the writ petition was allowed in accordance with the court's order, emphasizing the importance of adherence to natural justice principles in quasi-judicial proceedings related to financial matters under the GST Act.