Facts of the Case

Sweta Distributors Pvt. Ltd. filed an application dated 01.11.2021 in Form GST-RFD-01 claiming a refund of Rs.10,49,562/- of tax paid on export of services for the period August 2021. The Department issued a show-cause notice dated 20.12.2021, returnable on 24.12.2021, proposing rejection on the ground that there was no nexus between input and output supply; the petitioner replied on 23.12.2021 and later, on 17.01.2022, uploaded further documents including proof of foreign remittance and export invoices. However, the respondents had already, on 30.12.2021, passed an Order-in-Original rejecting the refund without recording any reasons — a fact that came to the petitioner's notice only in January 2022. The petitioner's appeal against this order was dismissed by the Appellate Authority on 04.05.2022, relying on Rule 89 of the Central Goods and Services Tax Rules, 2017, on the ground that export invoices had not been furnished. In the absence of a constituted GST Appellate Tribunal, the petitioner challenged both orders before the Bombay High Court under Article 226. The matter was heard by a Division Bench on 04.12.2023.

Issues Involved

  1. Whether the Order-in-Original rejecting the refund application was passed without affording the petitioner adequate opportunity to place on record the documents it had uploaded before the order was issued.
  2. Whether the Appellate Authority could reject the appeal by relying on Rule 89 of the CGST Rules — a ground neither raised in the show-cause notice nor put to the petitioner for explanation.
  3. Whether the orders were consequently vitiated for violation of the principles of natural justice, warranting remand for fresh adjudication.

Petitioner's Arguments

  • The petitioner argued that the Order-in-Original was passed in haste — the documents relating to proof of foreign remittance and export invoices were uploaded on 17.01.2022, but the rejection order had already been passed on 30.12.2021 without considering them.
  • It contended that the Appellate Authority never called for any explanation on the ground (Rule 89 of the CGST Rules) on which the appeal was ultimately rejected, and that this ground did not form part of the original show-cause notice either.
  • The petitioner submitted that no nexus between input and output supply was required to claim the refund — the only requirement was that the input tax be used in the course of business — and that the impugned orders be set aside and remanded for fresh adjudication.

Respondent's Arguments

  • The respondents maintained that the petitioner was required to establish nexus, since the input tax credit related to goods while the refund was claimed on export of services.
  • However, the respondents did not dispute that the orders had been passed without considering the issues raised by the petitioner, and stated they had no objection to the matter being remanded to the original authority.

Court Order/Findings

  • The Court found an apparent violation of natural justice, since the Order-in-Original was passed without giving the petitioner adequate opportunity to place its 17.01.2022 documents on record, and contained no reasons for rejecting the refund.
  • It further found that the Order-in-Appeal relied on Rule 89 of the CGST Rules, a ground that was never part of the show-cause notice nor put to the petitioner, and that the Appellate Authority had not called for supporting details before relying on it.
  • The Court quashed both the Order-in-Original dated 30.12.2021 and the Order-in-Appeal dated 04.05.2022, restored the refund application to the file of the jurisdictional respondent for fresh adjudication, and directed a fresh hearing followed by a speaking order within four months of that hearing.
  • All contentions of the parties were expressly kept open, and there was no order as to costs.

Important Clarification

  • An adjudicating or appellate authority cannot reject a GST refund claim on a ground that was never put to the taxpayer in the show-cause notice or otherwise called for explanation — doing so violates natural justice regardless of whether the ground might independently have merit.
  • An Order-in-Original passed without recording reasons, and without considering documents the taxpayer was in the process of uploading before the order issued, is liable to be set aside on this basis alone, without the court needing to decide the substantive refund entitlement.

Sections Involved

  • Form GST-RFD-01 under the Central Goods and Services Tax Rules, 2017 — the prescribed application for claiming a GST refund, here on export of services.
  • Rule 89 of the Central Goods and Services Tax Rules, 2017 — lays down the procedure and documentation requirements for refund applications.
  • Article 226 of the Constitution of India — invoked in the absence of a constituted GST Appellate Tribunal to challenge the Order-in-Appeal.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee to the extent that both impugned orders were quashed on natural-justice grounds and the matter remanded for fresh adjudication with all contentions kept open — a procedural win rather than a final determination that the refund is payable.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Bombay
  • Case No.: WRIT PETITION NO.2663 OF 2023
  • CNR: Not available on record
  • Coram: Justice G.S. Kulkarni and Justice Jitendra Jain
  • Decision Date: 04.12.2023
  • Disposal Nature: Allowed - refund rejection order quashed, remanded for fresh adjudication

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