2022 (7) TMI 753 - HC - GST

Rejection of refund claim - ground mentioned for rejecting the claim is Wrong ITC Claim - infirmities in the grounds of rejection - the grounds indicated for proposed refusal for refund were inter alia that the claim for refund was more than two years old - Section 54 of CGST Act - HELD THAT - The striking infirmity in the impugned order whereby the refund was rejected was that it was entirely new ground than the aforesaid mentioned in the show cause notice. The claim was negatived on the ground that refund was inadmissible because of wrong ITC claim. It turns out that the new ground is relied on by the authority. It rejected claim of refund which was never mentioned in the show cause notice. The petitioner has never opportunity to meet with the said ground. The refund claim/application of the petitioner shall be reconsidered by the authority concerned afresh after following due procedure in law and appropriate order in accordance with law shall be passed to complete the entire exercise within 12 weeks from today - petition allowed.

Summary

Issues:
Challenge to order rejecting refund claim under CGST Act based on wrong ITC claim.

Analysis:
The petitioner challenged the order dated 13.7.2021 passed by the Deputy Commissioner of State Tax, which treated the refund claim as inadmissible due to a "Wrong ITC Claim" under section 54(5) read with section 56 of the Central Goods and Services Tax Act, 2017. The order followed a show cause notice dated 19.6.2021 related to the refund application filed by the petitioner. The petitioner, an importer under the Export Promotion Capital Goods Scheme, filed a refund application for IGST paid on the import of capital goods in July and August 2017. The refund claim amount was Rs. 1.24 crores filed on 28.12.2019.

The competent authority, in the show cause notice, mentioned reasons for not granting the refund, including that the claim was over two years old, lacked clear grounds, had unclear refund calculation, and incomplete documents. The petitioner, unable to attend the personal hearing due to time constraints, made a representation in response to the notice. However, the impugned order rejecting the refund introduced a new ground not mentioned in the show cause notice, i.e., the wrong ITC claim, denying the petitioner an opportunity to address it.

The Court found the rejection of the refund claim on a new ground not raised in the show cause notice to be a significant flaw. Consequently, the impugned order was quashed, and the refund claim was directed to be reconsidered by the authority following due procedure within 12 weeks. The Court clarified that it did not delve into the merits of the case but focused on the procedural aspect. As a result, the petition was allowed, and the rule was made absolute in the aforementioned terms.