IGST CGST refund rejection quashed for violating natural justice principles despite appellate hearing opportunity

Rajasthan HC allowed petition challenging rejection of IGST and CGST refund. The adjudicating authority violated natural justice principles by denying hearing opportunity. Appellate authority erred in not interfering with the order merely because it provided hearing during appeal proceedings. HC held that natural justice violation at first instance cannot be cured by adequate hearing at appellate stage, citing SC precedent. Both orders were unsustainable. Matter remanded to adjudicating authority to follow Rule 92(3) of CGST Rules and pass appropriate order in accordance with law.

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Issues:
Refund of accumulated input tax credit under Section 54(3) of the CGST Act, 2017; Violation of principles of natural justice in rejecting the refund claim; Applicability of Rule 92(3) of the CGST Rules.

Refund of Accumulated Input Tax Credit:
The petitioner sought a refund of accumulated input tax credit on export of goods under Section 54(3) of the CGST Act, 2017. The Assistant Commissioner partially sanctioned the refund but rejected the claim for IGST and CGST. Subsequently, the Commissioner of Central Excise (Appeals) also rejected the appeal filed by the petitioner. The petitioner contended that the refund could not have been rejected without providing an opportunity of hearing as mandated by Rule 92(3) of the CGST Rules. The appellate authority acknowledged the violation of natural justice by the adjudicating authority but upheld the rejection on the basis of merits. The court emphasized the mandatory nature of the provisions and ruled that the orders rejecting the refund claim were invalid.

Violation of Principles of Natural Justice:
The petitioner argued that the adjudicating authority violated the principles of natural justice by not providing an opportunity of hearing before rejecting the refund claim. The appellate authority acknowledged this violation but upheld the rejection based on the merits of the case. The court held that the failure of natural justice at the initial stage cannot be rectified by ensuring natural justice at the appellate level. Citing precedents, the court emphasized the importance of adhering to natural justice principles throughout the adjudication process. Consequently, the court allowed the writ petition, quashed the orders rejecting the refund, and remanded the matter back to the adjudicating authority to reconsider the refund claim in compliance with Rule 92(3) of the CGST Rules.

Applicability of Rule 92(3) of the CGST Rules:
Rule 92(3) of the CGST Rules mandates the issuance of a notice to the applicant before rejecting a refund claim, providing an opportunity to respond, and subsequently making a decision. The court noted that the adjudicating authority failed to comply with this statutory provision by not following the prescribed procedure. The court emphasized the mandatory nature of the rule and ruled that the refund claim should not have been rejected without providing the applicant with an opportunity to be heard. The court's decision highlighted the importance of procedural fairness and adherence to statutory provisions in such matters.

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