Coal cess refund allowed after natural justice violation in zero-rated supplies case under Rule 92(3)

The HC allowed the writ application filed by the petitioner seeking proportionate refund of cess paid on coal utilized in zero-rated supplies. The court found that principles of natural justice were violated as personal hearing was not provided during original proceedings, only during appellate stage. The rejection order dated 31.07.2020 was deemed a non-speaking order without recording mandatory reasons under Rule 92(3) of Rules 2017. The court quashed the rejection order and remitted the case to respondent no. 3 to restart proceedings from personal hearing stage, ensuring compliance with natural justice principles.

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Issues Involved:

1. Violation of principles of natural justice.
2. Non-speaking order.
3. Absence of Document Identification Number (DIN) in SCN and rejection order.

Summary of Judgment:

1. Violation of Principles of Natural Justice:
The petitioner argued that the rejection of their refund claim was in violation of the principles of natural justice. The SCN dated 15.07.2020 was served on 16.07.2020, providing 15 days to respond. However, the personal hearing was prematurely scheduled for 30.07.2020. The petitioner submitted their reply on 31.07.2020, but the rejection order was issued the same day without considering this reply. The court noted that Rule 92(3) of the CGST Rules mandates a personal hearing and consideration of the reply before passing a rejection order. The court found that the rejection order dated 31.07.2020 was passed without providing an adequate opportunity for a hearing, thus violating the principles of natural justice.

2. Non-speaking Order:
The petitioner contended that the rejection order was a non-speaking order, lacking any recorded reasons for the decision. The court agreed, stating that Rule 92(3) requires the proper officer to record reasons in writing when rejecting a refund claim. The court cited precedents where similar non-speaking orders were quashed for failing to address the objections raised by the petitioner. The court concluded that the rejection order was unsustainable due to its lack of reasoning.

3. Absence of Document Identification Number (DIN):
The petitioner highlighted that the SCN and the rejection order did not bear a DIN, rendering them invalid as per Circular No. 122/41/2019-GST and Circular No. 128/47/2019-GST. The court noted that any communication without a DIN is deemed to have never been issued. The absence of DIN in the SCN and rejection order further invalidated the proceedings.

Conclusion:
The court found that the principles of natural justice were not followed, the rejection order was non-speaking, and the absence of DIN rendered the proceedings invalid. The court allowed the writ application, quashed the rejection order, and remitted the case to the respondent for fresh adjudication, ensuring compliance with the principles of natural justice, including a proper hearing and consideration of the petitioner's reply.

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