Facts of the Case

  • The Petitioner's Profile: Petitioner No. 1, M/s Adisan Laboratories Pvt. Ltd., is a private limited company engaged in business operations, and Petitioner No. 2 is its Shareholder and Managing Director.
  • Filing of Refund Claim: On March 30, 2022, the petitioners filed a formal application claiming a refund of accumulated Input Tax Credit (ITC) amounting to ₹14,90,629. The refund claim pertained to the financial period from April 2019 to March 2020 and was initiated due to an inverted duty structure, where the tax rate on input supplies was higher than the tax rate on outward output supplies.
  • Ambiguous Communication via Email: On May 4, 2022, the petitioners received an automated or standard email from the tax respondents advising them that a notice had been issued regarding their refund application. The email instructed them to view the specific notes and details by logging into the common GSTN portal.
  • Grievance of the Taxpayer: Upon logging in, the petitioners discovered that no such notice was visible, accessible, or hosted on the GSTN portal. Taking proactive measures, the petitioners dispatched a formal letter to the Assistant Commissioner on May 17, 2022, explicitly stating that no physical notice was served upon them and no digital notice was available on the portal.
  • Passing of Impugned Order: Disregarding the petitioners' written intimation, the Assistant Commissioner of Central Tax, Division-II (Pimpri), Pune-I Commissionerate proceeded to pass an ex-parte impugned order dated May 31, 2022 (received by the petitioner on May 27, 2022, via digital transmission protocols) completely rejecting the refund claim. Aggrieved by this outright dismissal without an opportunity to present their case, the petitioners filed a Writ Petition under Article 226 before the Bombay High Court.

Issues Involved

  1. Whether the digital or physical non-service of a mandatory show-cause notice in Form GST RFD-08, and its subsequent absence from the GSTN portal, violates the statutory framework structured under Rule 92(3) of the CGST Rules, 2017.
  2. Whether the rejection of a substantial tax refund claim without granting an explicit, effective opportunity of being heard amounts to a fatal violation of the principles of natural justice (audi alteram partem), rendering the adjudication order legally unsustainable.

Petitioner’s Arguments

  • Absolute Denial of Statutory Opportunity: The learned counsel appearing for the petitioners forcefully argued that the entire refund rejection process was conducted behind their back. They were structurally denied an equal and fair opportunity to counter the department's objections or establish their legitimate entitlement to the refund.
  • Uncontroverted Factual Record: The petitioners emphasized that they had actively flagged the technical discrepancy via their letter dated May 17, 2022, well before the passing of the rejection order. Despite being on notice that the taxpayer could not view the show-cause notice on the portal, the proper officer failed to serve it manually or rectify the portal error, opting instead to issue a summary rejection.
  • Violation of Statutory Prescriptions: It was argued that the proviso to Rule 92(3) acts as an absolute bar against passing an adverse order without an oral hearing. Since the issuance of Form GST RFD-08 is a condition precedent to any rejection, the complete absence of a validly served notice invalidates the subsequent order.

Respondent’s Arguments

  • Technical Compliance Assertions: The respondents, representing the Revenue department, relied primarily on the system-generated administrative trail, arguing that an email communication had been successfully dispatched to the taxpayer on May 4, 2022, alerting them to administrative actions on the portal.
  • Absence of Rebuttal on Non-Service: The respondents were unable to produce conclusive evidence to counter the factual assertion that the detailed notice was genuinely missing from the portal interface or that it had been successfully served through any other legally recognized mode of service. The statements made by the petitioner regarding the lack of portal visibility remained uncontradicted.

Court Order / Findings

  • Uncontroverted Facts Mandate Relieff: The Hon’ble High Court observed that the petitioners’ assertion—both in pre-adjudication letters and within the text of the writ petition—that the notice was never received nor available on the GSTN portal remained entirely uncontroverted by the revenue authorities.
  • Issuance of Notice is Not a Mere Formality: The Court explicitly observed that the procedural mandate under Rule 92(3) of the CGST Rules, 2017 requiring a notice in Form GST RFD-08 and a 15-day reply window is not an empty bureaucratic formality. It serves as a vital legislative mechanism designed specifically to give the applicant a meaningful chance to prove that the refund is fully payable under the law.
  • Impairment of Natural Justice: The Bench held that because the notice was neither served nor uploaded, the entire right to a fair hearing as envisaged under the statutory proviso to Rule 92(3) was completely impaired and frustrated.
  • Quashing and Restorations: Consequently, the High Court quashed and set aside the impugned rejection order dated May 31, 2022, strictly on the ground of natural justice violations without expressing any views on the underlying commercial merits of the refund claim. The refund application was restored to the file of the Assistant Commissioner.
  • Strict Timeline Imposed: To prevent further administrative delays caused by these circumstances, the Court made the Rule absolute and directed the respondents to strictly complete the fresh adjudication process in accordance with the law within a period of 8 weeks from the date the order was uploaded.

Important Clarification

  • Merits Remain Untouched: The High Court clarified that the setting aside of the tax order was executed purely on procedural infirmities and violations of natural justice, meaning the revenue authorities retain the full right to evaluate, audit, and decide the eligibility of the Inverted Duty Structure refund claim entirely on its own merits during the remanded proceedings.
  • Portal Glitches and Revenue's Duty: The ruling reinforces a crucial legal precedent: the mere generation of an alert email by the department does not discharge the legal burden of "service of notice" if the underlying document is completely absent from the GSTN portal. Tax officers must verify portal accessibility before concluding that a taxpayer has failed to respond to a notice.

Section Involved

  • Section 54 of the Central Goods and Services Tax (CGST) Act, 2017 (Specifically Section 54(3) relating to the refund of unutilized Input Tax Credit accumulated due to an inverted duty structure).
  • Rule 92 of the Central Goods and Services Tax (CGST) Rules, 2017 (Specifically Rule 92(3) mandating the issuance of notice in Form GST RFD-08 and providing a mandatory opportunity of being heard before rejecting a refund claim).

Link to download the order -https://mytaxexpert.co.in/uploads/1783312533_901compressed.pdf

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