GST refund rejection without proper notice violates natural justice principles under Rule 92(3)

The Rajasthan HC allowed a petition challenging rejection of GST refund claim due to violation of natural justice principles. The court held that Rule 92(3) of GST Rules 2017 mandates proper officer to issue notice in Form GST-RFD-08 stating clear reasons for proposed rejection before actually rejecting refund claims. The notice issued to petitioner failed to comply with statutory requirements as reasons stated in final rejection order were not mentioned in the show cause notice, making it a mere formality rather than meaningful exercise. The court ruled this constituted apparent violation of statutory provisions incorporating natural justice principles, rejecting respondent's objection regarding alternative remedy availability.

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Issues Involved:
1. Compliance with the mandate of law regarding notices issued to the petitioner.
2. Violation of statutory scheme incorporating principles of natural justice.
3. Entitlement to refund of GST due to cancellation of agreement.
4. Maintainability of the writ petition in light of the alternative remedy of appeal.

Summary:

Issue 1: Compliance with Mandate of Law Regarding Notices

The petitioner challenged the order dated 13.09.2023 passed by the Assistant Commissioner, State Tax, on the ground that the notices issued did not comply with the mandate of law. The notices in Form GST-RFD-08 were non-speaking and did not incorporate any reason for the proposed rejection of the refund claim.

Issue 2: Violation of Statutory Scheme Incorporating Principles of Natural Justice

The petitioner argued that the impugned order violated the principles of natural justice as incorporated in Rule 92(3) of the Central Goods and Services Tax Rules, 2017. The rule mandates that the proper officer must issue a notice stating the reasons for the proposed rejection of the refund claim and consider the applicant's reply before passing a final order. The court found that the notices issued were vague and mechanical, failing to disclose the reasons for the tentative decision to reject the refund claim, thus violating the principles of natural justice.

Issue 3: Entitlement to Refund of GST Due to Cancellation of Agreement

The petitioner, engaged in the construction and development business, sought a refund of GST paid due to the cancellation of a flat booking agreement. The authority rejected the refund claim on the grounds that the petitioner had passed on the incidence of tax to the buyers, making it ineligible for a refund u/s 54(8)(e) of the Central Goods and Services Tax Act, 2017.

Issue 4: Maintainability of the Writ Petition in Light of the Alternative Remedy of Appeal

The respondents argued that the petitioner had an alternative and efficacious statutory remedy of appeal, making the writ petition not maintainable. However, the court rejected this objection, stating that the violation of the principles of natural justice warranted judicial review despite the availability of an alternative remedy.

Conclusion:

The court set aside the impugned orders dated 13.09.2023 and remitted the matter to the proper officer for issuance of a proper notice in Form GST-RFD-08, obtaining the petitioner's reply, and passing an appropriate order in accordance with the law. The writ petition was allowed.

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