2021 (12) TMI 1040 - HC - GST

Refund of utilized input tax credit - rejection of claim for refund on the ground that petitioner had not submitted the required documents in hard copies for verification - Section 54(3) of the Telangana State Goods and Services Tax Act, 2017 read with Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) and Section 20(xiii) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) - principles of natural justice - HELD THAT - In a case where the proper officer is satisfied for reasons to be recorded in writing that the whole or any part of the amount claimed as refund is not admissible or is not payable, he shall issue notice to the applicant requiring filing of reply within 15 days of receipt of notice and after considering the reply make an order sanctioning the amount of refund in whole or in part or rejecting the refund claim which order shall be made available to the applicant. As per the proviso, an application for refund shall not be rejected without giving the applicant an opportunity of being heard. Therefore, there is a clear legal mandate that if an application for refund is to be rejected, the same can only be done after giving the applicant an opportunity of being heard. The expression 'opportunity of being heard' is not an expression of empty formality. It is a part of the well-recognized principle of audi alteram partem which forms the fulcrum of natural justice and is central to fair procedure. The principle is that no one should be condemned unheard - When the law requires that no application for refund shall be rejected without giving the applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for refund where no time-limit is fixed vis- -vis rejection of claim. Under subsection (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects without there being a corresponding provision for rejection of application not complete in all respects. It is settled law that if there is violation of the principles of natural justice, then the High Court will invoke its extraordinary jurisdiction under Article 226 of the Constitution of India notwithstanding the availability of the alternative remedy of appeal. The respondent is directed to hear afresh applications of the petitioner for refund within a period of two months from the date of receipt of a copy of this order - petition allowed.

Summary

Issues:
Rejection of claim of refund by the respondent.

Analysis:
The petitioner, engaged in exporting software and IT services, filed refund claims for unutilized input tax credit under relevant GST Acts for two periods. The respondent rejected the refund claim citing non-submission of required hard copy documents. The petitioner argued that under Rule 92(3) of CGST Rules, the proper officer must issue a notice and consider the reply before rejecting a claim, as per the Bombay High Court decision in BA CONTINUUM INDIA (P) LIMITED v. UNION OF INDIA. Despite notices, the respondent did not file a counter affidavit.

Section 54 of the CGST Act governs tax refunds, requiring applications in the prescribed form within two years. The officer must issue a refund order within 60 days of application receipt. Rule 89 and Rule 92 of CGST Rules detail the refund process, including the issuance of notices and replies before rejecting a claim. The proviso mandates that no refund application should be rejected without giving the applicant an opportunity to be heard.

The principle of 'opportunity of being heard' is crucial, ensuring natural justice and fair procedure. It is central to decision-making processes and judicial review. Rejection without granting this opportunity violates natural justice, as seen in the Bombay High Court case. The High Court can intervene under Article 226 of the Constitution if there is a breach of natural justice, even if an appeal remedy exists.

The Court set aside the rejection memos and directed the respondent to reconsider the refund applications within two months, granting the petitioner an opportunity to be heard. The judgment emphasizes the importance of following due process and providing a fair chance for applicants to present their case. All contentions were left open, and the writ petitions were allowed without costs. Any pending miscellaneous applications were to be closed.