2023 (1) TMI 841 - HC - GST

Refund of IGST and CGST - rejection of refund without providing opportunity of hearing - violation of principles of natural justice (audi alterem partem) - HELD THAT - The authority conclusively found that the natural justice had not been followed by the adjudicating authority, however, on the basis that natural justice was duly followed during appeal proceedings, did not interfere with the order on account of the said aspect of violation of principle of natural justice. It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them. The Hon ble Supreme Court in 63 Moon Technologies Ltd. v. Union of India 2019 (5) TMI 522 - SUPREME COURT , pointed out that breach or defect in observing Rules of natural justice in the trial administrative body cannot generally be cured by observing natural justice at the appellate stage, particularly when a clear statutory right has given at the trial stage of an assessment of compensation first by the prescribed authority and then a right of appeal to the appellate Tribunal. In view of the above fact situation, wherein admittedly the principles of natural justice have been violated by the adjudicating authority and the appellate authority only on account of the fact that it had provided opportunity of hearing, did not interfere with the order of the adjudicating authority, both the orders cannot be sustained. The matter is remanded back to the adjudicating authority to follow the provisions of Rule 92(3) of the CGST Rules and thereafter pass an appropriate order in accordance with law - Petition allowed by way of remand.

Summary

Issues:
Refund of accumulated input tax credit under Section 54(3) of the CGST Act, 2017; Violation of principles of natural justice in rejecting the refund claim; Applicability of Rule 92(3) of the CGST Rules.

Refund of Accumulated Input Tax Credit:
The petitioner sought a refund of accumulated input tax credit on export of goods under Section 54(3) of the CGST Act, 2017. The Assistant Commissioner partially sanctioned the refund but rejected the claim for IGST and CGST. Subsequently, the Commissioner of Central Excise (Appeals) also rejected the appeal filed by the petitioner. The petitioner contended that the refund could not have been rejected without providing an opportunity of hearing as mandated by Rule 92(3) of the CGST Rules. The appellate authority acknowledged the violation of natural justice by the adjudicating authority but upheld the rejection on the basis of merits. The court emphasized the mandatory nature of the provisions and ruled that the orders rejecting the refund claim were invalid.

Violation of Principles of Natural Justice:
The petitioner argued that the adjudicating authority violated the principles of natural justice by not providing an opportunity of hearing before rejecting the refund claim. The appellate authority acknowledged this violation but upheld the rejection based on the merits of the case. The court held that the failure of natural justice at the initial stage cannot be rectified by ensuring natural justice at the appellate level. Citing precedents, the court emphasized the importance of adhering to natural justice principles throughout the adjudication process. Consequently, the court allowed the writ petition, quashed the orders rejecting the refund, and remanded the matter back to the adjudicating authority to reconsider the refund claim in compliance with Rule 92(3) of the CGST Rules.

Applicability of Rule 92(3) of the CGST Rules:
Rule 92(3) of the CGST Rules mandates the issuance of a notice to the applicant before rejecting a refund claim, providing an opportunity to respond, and subsequently making a decision. The court noted that the adjudicating authority failed to comply with this statutory provision by not following the prescribed procedure. The court emphasized the mandatory nature of the rule and ruled that the refund claim should not have been rejected without providing the applicant with an opportunity to be heard. The court's decision highlighted the importance of procedural fairness and adherence to statutory provisions in such matters.