2022 (2) TMI 999 - HC - GST

Tax refund rejection orders quashed for violating natural justice principles under Rule 92

M/s. S.B. Homes Versus The Commissioner of CGST & C. Ex., The Assistant Commissioner of CGST & C. Ex., Adyar Division, Chennai

The HC quashed tax refund rejection orders for violating natural justice principles. The petitioner's ITC refund claims were rejected without proper ... Refund of ITC - claim of the petitioner rejected on the ground that, before making this rejection in respect of the alleged inadmissible portion, no notice has been served on the petitioner, no opportunity was given to the petitioner to put forth his case and without even giving any reason as to why the particular amount has been inadmissible - violation of principles of natural justice - HELD THAT:- Insofar as the preliminary objection, which, in fact, is the main objection raised by the respondent side with regard to the latches, this Court feels that, though there is no limitation prescribed under Article 226 for the litigants to approach the High Courts by invoking the extraordinary jurisdiction to issue prerogative writs, it is the self made law or judge made law in various pronouncements of the Hon'ble Supreme Court as well as the various High Courts, that doctrine of latches would definitely be made applicable to cases where Article 226 is invoked belatedly without any plausible reason - what is the time limit which can be construed as a belated one or within the reasonable period, depends upon the facts of each and every case, as in these arena there is no hard and fast rule. Here in the case in hand, the Rule, as referred to above, mandates that, a notice should be issued in a particular format giving 15 days time to the applicant to respond in a particular format and only thereafter order to be passed either to accept or reject the refund claim made by the applicant - When such a mandate is available in the Statute, the same has not been followed by the respondents as there is no whisper to show that, there has been a chance of giving any show cause notice or notice or opportunity to the petitioner as contemplated under sub-rule (3) of Rule 92 of the said Rules. If we look at the impugned order for instance in the first case which facts were dealt with in the earlier paras that, the inadmissible amount of a sum of ₹ 58,233/- has been quoted, where, absolutely no reason has been given by the respondents as to why such amount has been not admitted. Only in order to avoid these kind of orders, the rule contemplates to give an opportunity to the applicant before passing an order to reject or accept. When that being so, in these cases, since there has been no notice issued to the petitioner before passing the order of rejection with regard to the refund either in full or in part, this Court has no hesitation to hold that, the impugned orders insofar as the rejected portion i.e., inadmissible portion of the refund claim made by the petitioner are infirm and vitiated - since the blatant violation of principles of natural justice and also the statutory mandate as contemplated under the Rule referred, these kind of cases are entertainable before this Court by invoking Article 226 of the Constitution of India and in these cases, the two years period cannot be construed as a long delay to invoke the doctrine of latches to reject the claim of the petitioner as canvassed by the learned Standing Counsel appearing for the respondents. In all these writ petitions, the impugned orders, insofar as the rejection made by the second respondent with regard to the refund claim made in respect of each of the cases, are hereby quashed - Petition disposed off. Issues:Challenging refund application rejection orders based on violation of principles of natural justice and Rule 92 of the Central Goods and Service Tax Rules, 2017.Analysis:The batch of writ petitions challenged orders rejecting or partly rejecting refund applications by the second respondent. The petitioner's company, registered with the GST Department, regularly filed returns and claimed Input Tax Credit. The impugned order rejected a portion of the refund claim without serving notice or providing an opportunity to the petitioner, violating principles of natural justice. The petitioner contended that Rule 92 mandates issuing a notice and giving an opportunity to respond before rejecting any refund claim. The respondents argued that the delay in filing the writ petitions after two years renders them liable to be rejected based on latches.The court considered the submissions and materials before it. While there is no limitation under Article 226 for approaching the High Court, the doctrine of latches applies when invoking Article 226 belatedly without a plausible reason. The time limit for what constitutes a belated approach varies case by case. In this instance, the respondents did not follow the mandate of issuing a notice and providing an opportunity to respond before rejecting the refund claim, as required by Rule 92(3) of the Rules. The impugned orders lacked reasons for rejecting the inadmissible portion of the refund claim, further highlighting the violation of natural justice and statutory mandate.The court held that the impugned orders rejecting the refund claims were quashed, while the portion sanctioning the refund was sustained. The matters were remitted back to the jurisdictional Officer under the GST regime for reconsideration, emphasizing adherence to Rule 92(3) and providing a reasonable opportunity for the petitioner to be heard. The court concluded by disposing of the writ petitions with the mentioned orders and no costs awarded, closing the connected miscellaneous petitions.