Facts of the Case

The petitioner, M/s. Aref Abdul Sattar Textiles Pvt. Ltd., is a registered dealer under the Goods and Services Tax (GST) laws engaged in the business of textiles and sale of readymade garments. The petitioner had regularly filed GSTR-3B returns, including for the period from July 2017 to March 2018.

The petitioner filed a refund application dated 14.01.2022 claiming refund of ₹88,89,113, comprising:

  • IGST – ₹76,08,563
  • CGST – ₹6,40,275
  • SGST – ₹6,40,275

The refund was sought on the ground that the petitioner had made an excess payment of GST during the relevant period.

The Department issued a show cause notice dated 09.03.2022 proposing rejection of the refund application on the ground that it was barred by limitation under Section 54 of the Central Goods and Services Tax Act, 2017 and the corresponding provisions of the Telangana GST Act.

The petitioner submitted detailed objections on 10.03.2022, specifically contending that the refund application was filed within the prescribed limitation period. However, the refund claim was rejected by order dated 16.03.2022, merely stating "delay in refund application" without assigning any detailed reasons.

Aggrieved by the refund rejection order, the petitioner approached the Telangana High Court under Article 226 of the Constitution of India.

 

Issues Involved

  1. Whether the refund rejection order passed under Section 54 of the CGST Act, 2017 was sustainable without assigning proper reasons.
  2. Whether a refund application can be rejected merely by mentioning delay without dealing with the objections raised by the taxpayer.
  3. Whether the refund authority is required to pass a reasoned and speaking order while rejecting a GST refund claim.

 

Petitioner's Arguments

The petitioner contended that:

  • The refund application was filed within the period prescribed under the GST law.
  • The refund represented excess payment of GST made during July 2017 to March 2018.
  • Detailed objections were filed in response to the show cause notice explaining why the refund claim was not barred by limitation.
  • The adjudicating authority failed to examine the objections submitted by the petitioner.
  • The refund rejection order merely stated "delay in refund application" without recording any reasons or legal findings.
  • Such a non-speaking order violated the principles of natural justice and was arbitrary, illegal, and unconstitutional.

 

Respondent's Arguments

The respondents contended that:

  • Under Section 54 of the CGST Act, 2017, the refund application was required to be filed within the prescribed limitation period.
  • Since the refund application was allegedly filed beyond the statutory period, the claim was liable to be rejected.
  • Accordingly, the refund application was rejected on the ground of delay.

 

Court Order / Findings

The Telangana High Court observed that the impugned refund rejection order was not a speaking order.

The Court noted that:

  • No reasons whatsoever had been assigned for rejecting the refund application.
  • The authority had failed to consider or even refer to the detailed objections submitted by the petitioner on 10.03.2022.
  • Merely mentioning "delay in refund application" without recording findings on the objections raised by the petitioner could not constitute a valid adjudication.
  • Administrative and quasi-judicial authorities are required to pass reasoned orders, particularly where civil consequences arise.

Accordingly, the High Court:

  • Set aside the refund rejection order dated 16.03.2022.
  • Remanded the matter to the Deputy Commissioner (State Tax) for fresh adjudication.
  • Directed the authority to provide the petitioner with a reasonable opportunity of hearing, including a personal hearing.
  • Directed that a fresh reasoned order be passed within three months from the receipt of the High Court's order.

The writ petition was accordingly disposed of.

 

Important Clarification

This judgment reiterates that:

  • A GST refund claim cannot be rejected through a cryptic or non-speaking order.
  • Authorities exercising powers under Section 54 of the CGST Act must pass well-reasoned orders dealing with every objection raised by the taxpayer.
  • Failure to assign reasons amounts to violation of the principles of natural justice.
  • A mere observation that the refund application is delayed is insufficient unless supported by legal reasoning and consideration of the taxpayer's submissions.

 

Sections Involved

  • Section 54 of the Central Goods and Services Tax Act, 2017
  • Section 54 of the Telangana Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Articles 14 and 19(1)(g) of the Constitution of India

 

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783313902_1006compressed.pdf

 

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