Facts of the Case

  • The Parties: Petitioner No. 1, Adisan Laboratories Pvt. Ltd., is a private limited company based in Pune, and Petitioner No. 2 is its Shareholder & Managing Director. The Respondents include the Union of India through the Revenue Secretary, the Commissioner of Central Goods and Services Tax (Pune-I), and the Assistant Commissioner of Central Goods and Services Tax (Division-II, Pimpri, Pune).
  • The Refund Claim: On March 30, 2022, the Petitioners filed a formal application claiming a GST refund amounting to ₹14,90,629/- for the period from April 2019 to March 2020. The refund was claimed on account of unutilized Input Tax Credit (ITC) accumulated due to an inverted duty structure, wherein the rate of tax on input materials was higher than the rate of tax on finished output supplies.
  • The Dispute Breakdown: On March 4, 2022, the Petitioners received an automated email from the department advising them that a notice had been issued regarding their refund claim and directing them to view the details by logging into the GSTN portal.
  • System Discrepancy: Upon accessing the portal, the Petitioners found that no such notice was available or visible on the GSTN interface. On May 17, 2022, the Petitioners formally addressed a communication to the department stating explicitly that the notice had not been served on them nor was it accessible on the portal.
  • Ex-Parte Order: Disregarding the petitioner's communication, the Assistant Commissioner passed an impugned order dated May 31, 2022 (received by the Petitioners on May 27, 2022), summarily rejecting the entire refund claim without providing an administrative hearing. Aggrieved by this, the Petitioners filed a Writ Petition before the High Court.

Issues Involved

  1. Whether the action of the Respondent authority in rejecting the refund application without ensuring the actual service/visibility of the show cause notice in Form GST RFD-08 on the GSTN portal violates Rule 92(3) of the CGST Rules, 2017.
  2. Whether the impugned refund rejection order violates the fundamental Principles of Natural Justice (Audi Alteram Partem), thereby rendering the administrative adjudication void and legally unsustainable.

Petitioner’s Arguments

  • Violation of Statutory Rules: The learned counsel for the Petitioners argued that the department failed to adhere to the mandatory procedural requirements set out under Chapter XI of the CGST Rules, 2017. Specifically, Rule 92(3) mandates the issuance of a deficiency or rejection notice, allowing a 15-day window for submission of a reply.
  • Denial of Principles of Natural Justice: It was vigorously contended that issuance of a notice is not a mere ministerial formality but a substantive right granted to the taxpayer to demonstrate that the refund is validly payable.
  • Uncontroverted Facts: The Petitioners emphasized that they had proactively informed the department in writing prior to the passing of the order that the notice was completely missing from the GSTN portal. Despite this technical/procedural glitch being brought to light, the authority went ahead and passed an adverse order behind their back.

Respondent’s Arguments

  • Technical Compliance: The Respondents appeared through their counsel and waived formal service. While they sought to support the department's administrative machinery, they could not factual dispute or provide evidence to counter the Petitioner's specific assertion that the notice was not physically or digitally served or hosted on the portal.
  • Uncontroverted Record: The factual assertions made by the petitioner regarding the non-availability of the notice on the GSTN portal remained completely uncontroverted on the record of the Court.

Court Order / Findings

  • Mandatory Nature of Rule 92(3): The Division Bench of the Bombay High Court, comprising Justice Nitin Jamdar and Justice Gauri Godse, examined the scheme of Section 54 and Rule 92. The Court observed that the proviso to Rule 92(3) of the CGST Rules, 2017 contains an absolute statutory bar stating that no application for refund shall be rejected without giving the applicant an opportunity of being heard.
  • Notice is Not a Formality: The High Court categorically held that the issuance of a notice under Rule 92(3) is not an empty administrative formality. It serves as a vital tool in aid of justice, ensuring the applicant has a fair window to justify the refund claim.
  • Impairment of Rights: Since the department failed to prove that the notice was either served or successfully populated on the GSTN portal, and considering that the petitioner's prior complaints regarding this issue went ignored, the Court held that the petitioner's opportunity of being heard was severely impaired.
  • Operative Order:
    • The High Court quashed and set aside the impugned refund rejection order dated May 31, 2022.
    • The refund application of the Petitioners was restored to the file of the proper officer.
    • The Respondents were directed to strictly follow the statutory methodology prescribed under Rule 92 of the CGST Rules, 2017, and conclude the fresh proceedings within a period of 8 weeks from the date the order is uploaded.
    • The Court clarified that it had set aside the order strictly on the ground of natural justice and procedural lapses, without expressing any opinion on the commercial/technical merits of the refund claim, which the authority must decide independently.

Important Clarification

  • Digital Service vs. Automated Glitches: This ruling reinforces a vital precedent for the GST regime: automated emails or technical logs stating a notice "has been issued" do not amount to valid legal service if the document fails to actually appear on the taxpayer's GSTN portal dashboard.
  • Adherence to Due Process: Revenue authorities cannot bypass the mandate of a personal hearing or the 15-day response window under the guise of digital processing. If a taxpayer brings a portal glitch to the department's attention, the officer is legally obligated to ensure actual service of the SCN before passing an adverse ex-parte order.

Section Involved

  • Section 54 of the Central Goods and Services Tax (CGST) Act, 2017: Governs the claims, eligibility, and processing of refunds of unutilized Input Tax Credit (ITC).
  • Section 54(3) of the CGST Act, 2017: Specifically deals with the refund of unutilized Input Tax Credit accumulated on account of an inverted duty structure (where the tax rate on inputs is higher than the tax rate on output supplies).
  • Rule 92 of the Central Goods and Services Tax (CGST) Rules, 2017: Prescribes the specific methodology, timelines, and procedural requirements for processing refund applications.
  • Rule 92(3) of the CGST Rules, 2017: Mandates that if a Proper Officer intends to reject a refund claim either fully or partially, they must issue a notice in Form GST RFD-08 allowing the applicant 15 days to reply, and strictly prohibits rejection without giving the applicant a reasonable opportunity of being heard.

Link to download the order -https://mytaxexpert.co.in/uploads/1783312400_900compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content.The material has been prepared with the assistance of AI tools.