Facts of the Case

The Petitioner, M/s Sisla Laboratories, filed two refund applications under Section 54(3) of the Central Goods and Services Tax Act, 2017 for different tax periods:

  • Refund Application dated 17.05.2019 (₹9,59,252) for July 2017–March 2018
  • Refund Application dated 12.06.2019 (₹10,65,043) for June 2018–March 2019

Despite filing the applications in 2019, the refund claims were not processed. The Petitioner approached the Delhi High Court seeking directions for processing of the refund claims.

During proceedings, it was revealed:

  • The first application had been rejected via SCN dated 05.07.2019 and order dated 19.09.2019, allegedly not communicated/uploaded on the portal.
  • The second application remained unprocessed, and the Department claimed that the deficiency memo (RFD-03) could not be traced. 

Issues Involved

  1. Whether rejection of refund without proper communication of SCN and order violates principles of natural justice.
  2. Whether refund can be withheld when the Department fails to trace the deficiency memo.
  3. Whether the Petitioner can be granted relief despite delay due to lack of knowledge of rejection order. 

Petitioner’s Arguments

  • The SCN and rejection order for the first refund application were never uploaded or communicated, depriving the Petitioner of the opportunity to respond.
  • The second refund application could not be processed due to Departmental lapses, including inability to trace the deficiency memo.
  • The delay was not attributable to the Petitioner, and refund claims should be processed in accordance with law.

Respondent’s Arguments

  • For the first application, the Department contended that:
    • SCN was issued and multiple opportunities of hearing were provided.
    • The Petitioner failed to submit required documents in time.
  • For the second application:
    • The Department admitted that the deficiency memo could not be traced.
    • It was argued that documents were not properly submitted initially.

Court’s Findings / Order

1. First Refund Application (17.05.2019)

  • The Court noted that the rejection order came to the Petitioner’s knowledge only in February 2025.
  • Held that statutory remedies cannot be denied due to lack of communication.
  • The Petitioner was permitted to file an appeal under Section 107 of the CGST Act within one month.
  • Directed that such appeal shall not be rejected on limitation and must be decided on merits.

2. Second Refund Application (12.06.2019)

  • The Court observed that:
    • The Department could not produce or trace the deficiency memo (Form GST RFD-03).
    • There was no valid ground to withhold refund.
  • Accordingly, the Court directed:
    • Refund to be processed.
    • Payment along with statutory interest from 12.06.2019.
    • Compliance within two months.

Important Clarification

  • Non-traceability of deficiency memo cannot be used against the taxpayer.
  • Failure to communicate SCN/order properly preserves the right to appeal.
  • Administrative lapses of the Department cannot prejudice the taxpayer’s statutory rights. 

Sections & Rules Involved

  • Section 54, CGST Act, 2017 – Refund provisions
  • Section 54(1) – Time limit for refund application
  • Section 54(3) – Refund of unutilized ITC
  • Section 54(4) – Requirement of documentary evidence
  • Section 54(7) – Time limit for refund order
  • Section 107, CGST Act – Appeal provisions
  • Rule 90(3), CGST Rules, 2017 – Deficiency memo (Form GST RFD-03) 

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS08072025CW112872023_182355.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.