2021 (3) TMI 857 - HC - GST

Validity of refund rejection order - compliance with the provisions of the CGST Act and the Rules framed thereunder, or not - violation of the principles of natural justice - contention is that rejection of refund claim of the petitioner is not in conformity with the proposal made in the show cause notice that was served upon the petitioner - HELD THAT - It is true that any order passed by the adjudicating authority including an order passed under Section 54 of the Act read with Rule 92 of the Rules of 2017 is appealable before the appellate authority and the appellate authority is empowered to make such further enquiry, as may be necessary and pass such order as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against, but shall have no power to remand the case to the adjudicating authority that has passed the impugned order. However, contention of learned counsel for the petitioner is that the impugned order is not only cryptic but in sheer violation of the principles of natural justice. It is trite that alternative remedy is not a complete bar to the entertaining of writ petition filed for enforcement of any of the fundamental rights or where there has been a violation of principles of natural justice or where the order under challenge is wholly without jurisdiction or the vires of statute are under challenge. As mandated by Rule 92 and is also the demand of principles of natural justice, no notice of show cause was given to the petitioner to explain as to why his claim for refund may not be rejected on merits. A unilateral decision was taken and the petitioner was conveyed the outcome of such decision i.e. rejection of the claim of the petitioner - Learned counsel for the petitioner is correct that with regard to the passing of order of rejection of the refund claim of the petitioner on merits, he was never put on notice nor was any opportunity of being heard ever afforded to him. It is, thus, apparent that the impugned order passed by the adjudicating authority i.e. respondent No.1 herein traverses beyond the scope of show cause notice, which was served upon the petitioner to show cause as to why his claim should not be rejected having been filed beyond limitation. Thus, impugned order of rejection of refund claim of the petitioner is not inconformity with the proposal made in the show cause notice that was served upon the petitioner when the adjudicating authority found it barred by limitation. The case remanded back to respondent No.1 for passing order afresh after putting the petitioner to proper show cause notice and after affording him a reasonable opportunity of being heard - petition allowed by way of remand.

Summary

Issues:
1. Refund rejection order challenged on grounds of violation of natural justice.
2. Availability of alternative remedy under Section 107 for appeal.
3. Adjudicating authority's denial of opportunity of being heard before rejecting refund claim.
4. Violation of principles of natural justice and Article 14 of the Constitution.
5. Consideration of writ petition under Article 226 despite alternative remedy.

Issue 1: Refund Rejection Order and Violation of Natural Justice
The petitioner challenged the refund rejection order issued by respondent No.1, alleging that it violated the provisions of the Central Goods and Service Tax Act, 2017, and the Rules framed thereunder. The petitioner contended that the order was passed without granting an opportunity of being heard, which is a violation of the principles of natural justice. The petitioner had submitted a refund claim, which was initially questioned on the grounds of being time-barred. However, after the petitioner explained the delay citing relevant notifications due to the COVID-19 pandemic, the claim was processed and ultimately rejected without further notice or opportunity for the petitioner to present their case on the merits.

Issue 2: Availability of Alternative Remedy under Section 107
The Advocate General for the respondents raised a preliminary objection regarding the maintainability of the petition, citing the availability of an alternative remedy under Section 107 for appeal before the Appellate Authority. However, the petitioner argued that the impugned order not only lacked clarity but also breached the principles of natural justice. The court acknowledged that while an alternative remedy exists, the violation of fundamental rights or natural justice can still warrant a writ petition under Article 226 of the Constitution.

Issue 3: Denial of Opportunity of Being Heard
The court emphasized that the petitioner, as per Section 54 of the Act and Rule 92 of the Central Goods and Service Tax Rules, should have been given an opportunity of being heard before the rejection of the refund claim. It was noted that the impugned order failed to adhere to the proviso to Rule 92(3) of the Rules of 2017, which necessitates granting such an opportunity. The unilateral decision to reject the claim without affording the petitioner a chance to present their case on the merits was deemed a violation of natural justice.

Issue 4: Violation of Principles of Natural Justice and Article 14
The court agreed with the petitioner's contention that the impugned order, passed without providing an opportunity of being heard, was fundamentally flawed and violated the principles of natural justice. It was highlighted that such orders, which contravene natural justice principles and Article 14 of the Constitution of India, can be challenged through a writ petition under Article 226, despite the availability of an alternative statutory remedy.

Issue 5: Consideration of Writ Petition under Article 226
In light of the alleged violation of natural justice, the court held that the availability of an alternative statutory remedy does not bar the consideration of a writ petition under Article 226. Citing exceptions recognized by the Supreme Court, the court concluded that in cases involving violations of natural justice, the writ jurisdiction can be exercised even when an alternative remedy exists. The court allowed the petition, quashed the impugned order, and remanded the case back to respondent No.1 for a fresh decision after providing the petitioner with a proper show cause notice and an opportunity to be heard.