2024 (5) TMI 717 - HC - GST

Rejection of refund claim - Violation of principles of natural justice - notices issued to the petitioner did not comply with the mandate of law - HELD THAT - A fair, logical and rational interpretation of the aforesaid provision would be that in case proper officer is satisfied that claim for refund is not admissible either wholly or in part or in a case where it is found to be not payable for some other reasons, then it is required to issue a notice in FORM GST-RFD-08 to the applicant requiring him to furnish a reply in FORM GST-RFD-09 within a stipulated period. The Rule making authority in its wisdom has laid down that whenever there is a satisfaction arrived at to reject wholly or in part the claim for refund, a notice is required to be mandatorily issued clearly stating the reasons for such satisfaction arrived at by the proper officer. This provision has been included in the Rules of 2017 to ensure that before rejection of the claim, the applicant comes to know why his application is being rejected so that he could get an opportunity to satisfy the authority that the tentative reason/satisfaction is not correct. The object and purpose seems to minimise the error in the decision making process. If what has been stated in the GST-RFD-08 notice with regard to reasons is juxtaposed with the reasons which have been assigned in the impugned order to reject the claim of refund, it would be clear that what was stated in the impugned order to reject claim for refund was not at all stated, even briefly, in the show cause notice issued under Rule 92(3) of the Rules of 2017. It is, thus, apparent that the issuance of show cause notice was a farce and an empty formality by the authority rather than making it a meaningful exercise requiring the assessee to offer its application for claim of refund - The provisions contained in Rule 92(3) of the Rules of 2017 incorporate the principles of natural justice as it mandates and obligates the proper officer to disclose to the applicant the reason for his tentative decision to reject refund application with an object to invite response, consider the same and pass the order. Therefore, there is apparent violation of statutory provisions incorporating principles of natural justice. The provisions contained in Rule 92(3) of the Rules of 2017 incorporating principles of natural justice were completely violated. If that be so, the objection to the maintainability of the petition on the ground of alternative remedy would not hold water. The said objection is accordingly rejected. The petition is allowed.

Issues Involved:
1. Compliance with the mandate of law regarding notices issued to the petitioner.
2. Violation of statutory scheme incorporating principles of natural justice.
3. Entitlement to refund of GST due to cancellation of agreement.
4. Maintainability of the writ petition in light of the alternative remedy of appeal.

Summary:

Issue 1: Compliance with Mandate of Law Regarding Notices

The petitioner challenged the order dated 13.09.2023 passed by the Assistant Commissioner, State Tax, on the ground that the notices issued did not comply with the mandate of law. The notices in Form GST-RFD-08 were non-speaking and did not incorporate any reason for the proposed rejection of the refund claim.

Issue 2: Violation of Statutory Scheme Incorporating Principles of Natural Justice

The petitioner argued that the impugned order violated the principles of natural justice as incorporated in Rule 92(3) of the Central Goods and Services Tax Rules, 2017. The rule mandates that the proper officer must issue a notice stating the reasons for the proposed rejection of the refund claim and consider the applicant's reply before passing a final order. The court found that the notices issued were vague and mechanical, failing to disclose the reasons for the tentative decision to reject the refund claim, thus violating the principles of natural justice.

Issue 3: Entitlement to Refund of GST Due to Cancellation of Agreement

The petitioner, engaged in the construction and development business, sought a refund of GST paid due to the cancellation of a flat booking agreement. The authority rejected the refund claim on the grounds that the petitioner had passed on the incidence of tax to the buyers, making it ineligible for a refund u/s 54(8)(e) of the Central Goods and Services Tax Act, 2017.

Issue 4: Maintainability of the Writ Petition in Light of the Alternative Remedy of Appeal

The respondents argued that the petitioner had an alternative and efficacious statutory remedy of appeal, making the writ petition not maintainable. However, the court rejected this objection, stating that the violation of the principles of natural justice warranted judicial review despite the availability of an alternative remedy.

Conclusion:

The court set aside the impugned orders dated 13.09.2023 and remitted the matter to the proper officer for issuance of a proper notice in Form GST-RFD-08, obtaining the petitioner's reply, and passing an appropriate order in accordance with the law. The writ petition was allowed.

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