GST transition refund compliance accepted through book debit and TRAN-1 treatment; denial beyond show cause notice rejected.

In a GST transition refund dispute, pre-GST compliance requirements under Notification No. 27/2012 were treated as satisfied where the amount was debited in the books and not carried into TRAN-1, making strict reliance on the old ST-3 mechanism impracticable after the tax regime change. The refund denial was also found unsustainable because the adjudicating authority relied on grounds not proposed in the show cause notices, exceeding their scope. The impugned orders were set aside and the refund appeals succeeded with consequential relief as admissible in law.

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Issues: (i) Whether the refund claim could be denied for non-compliance with paragraph 2(h) of Notification No. 27/2012 after the introduction of GST when the appellant had debited the refund amount in its books and the credit was not carried forward into TRAN-1; (ii) Whether the adjudicating authority could reject the refund on grounds not proposed in the show cause notices.

Issue (i): Whether the refund claim could be denied for non-compliance with paragraph 2(h) of Notification No. 27/2012 after the introduction of GST when the appellant had debited the refund amount in its books and the credit was not carried forward into TRAN-1.

Analysis: The condition in paragraph 2(h) was examined in the context of the transition from the pre-GST regime to the GST regime. The credited amount was shown to have been debited in the appellant's books and not carried forward into TRAN-1. In the changed statutory environment, strict insistence on the old ST-3 based mechanism was held to be impracticable, and the post-GST steps were treated as sufficient compliance with the refund condition.

Conclusion: The refund could not be denied on the ground of alleged non-compliance with paragraph 2(h).

Issue (ii): Whether the adjudicating authority could reject the refund on grounds not proposed in the show cause notices.

Analysis: The refund rejection was also tested against the scope of the show cause notices. It was found that rejection of refund had not been specifically proposed, and the adjudicating authority had gone beyond the notices. This defect was treated as an independent ground vitiating the denial of refund.

Conclusion: The rejection of refund on grounds beyond the show cause notices was unsustainable.

Final Conclusion: The impugned orders were set aside and the refund appeals succeeded, with consequential benefits as admissible in law.

Ratio Decidendi: In a GST transition scenario, refund conditions framed for the pre-GST regime may be satisfied by substantial compliance through equivalent bookkeeping and transitional treatment, and refund cannot be denied on grounds not proposed in the show cause notice.

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