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

The HC quashed tax refund rejection orders for violating natural justice principles. The petitioner's ITC refund claims were rejected without proper notice, opportunity to respond, or reasons for inadmissible portions. Despite respondent's objection regarding delay in filing writ petition, the court held that when statutory mandates under Rule 92 requiring 15-day notice before rejection are blatantly violated, such cases remain entertainable under Article 226. The two-year delay was not considered excessive given the procedural violations. The rejection orders were set aside for non-compliance with statutory requirements and natural justice.

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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.

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