2024 (5) TMI 717 - HC - GST

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 ... Principles of natural justice - Refund of GST - Show cause notice under Rule 92(3) - Notice in FORM GST-RFD-08 - Reply in FORM GST-RFD-09 - Section 54 refund scheme - Passing on the incidence of tax - Remand for fresh considerationPrinciples of natural justice - Show cause notice under Rule 92(3) - Notice in FORM GST-RFD-08 - Reply in FORM GST-RFD-09 - Compliance of the show cause notice with the mandate of Rule 92(3) of the Central Goods and Services Tax Rules, 2017 and incorporation of principles of natural justice - HELD THAT: - Rule 92(3) requires that when the proper officer is satisfied that a refund claim is not admissible or payable, he must issue a notice in FORM GST RFD-08 stating reasons for that satisfaction, invite a reply in FORM GST RFD-09 and, after considering the reply, pass the final order. The Court found that the notices issued to the petitioner were identical, vague and did not disclose the tentative reasons on which the officer had formed satisfaction to reject the refund; they were thus non-speaking and failed to communicate the grounds of tentative rejection. Because the statutory scheme mandates disclosure of reasons so as to give a meaningful opportunity to be heard, the issuance of the impugned notices amounted to a mechanical formality and violated the rule and the principles of natural justice incorporated therein. Consequently the final orders passed in FORM GST-RFD-06 could not stand. [Paras 11, 12, 15, 16]The notices under Rule 92(3) were non speaking and violated principles of natural justice; the consequent orders are vitiated.Refund of GST - Section 54 refund scheme - Passing on the incidence of tax - Validity of the authority's conclusion (as recorded in the impugned orders) that the petitioner had passed on the incidence of tax and therefore was not entitled to refund - HELD THAT: - The impugned orders for the first time recorded the reasoning that the petitioner had passed the incidence of tax to buyers and therefore refund under Section 54(8)(e) would not be payable. However, that specific tentative reasoning was not communicated in the FORM GST-RFD-08 notices to the petitioner, depriving it of an opportunity to address that precise ground. The High Court did not decide the correctness of the factual or legal conclusion on incidence of tax; instead, because the mandatory procedural safeguard under Rule 92(3) was not observed, the Court set aside the final orders and refrained from adjudicating the substantive question on merits. [Paras 14, 15, 17]The merits of the authority's conclusion on passing on incidence of tax were not finally adjudicated and require fresh consideration in compliance with Rule 92(3).Remand for fresh consideration - Notice in FORM GST-RFD-08 - Reply in FORM GST-RFD-09 - Relief to be granted: setting aside of the impugned orders and remand for fresh consideration with proper notice and opportunity to reply - HELD THAT: - Given the failure to disclose the reasons for tentative rejection in the FORM GST-RFD-08 notices and the consequent breach of the procedural mandate in Rule 92(3), the Court concluded that the appropriate remedy is to set aside the orders in FORM GST-RFD-06 and remit the matters to the proper officer. The authority is directed to issue proper, speaking notices in FORM GST-RFD-08, obtain the petitioner's reply in FORM GST-RFD-09 and then pass orders in accordance with law after considering that reply. [Paras 16, 17]Impugned orders are set aside and the matters are remitted to the proper officer for fresh consideration after issuance of proper FORM GST-RFD-08 notices and receipt of replies.Alternative remedy - Maintainability of writ petition - Maintainability of the writ petition despite existence of statutory appellate remedy - HELD THAT: - Respondents contended that an alternative efficacious statutory remedy of appeal existed and thus the writ petition was not maintainable. The Court held that because there was a clear statutory breach of Rule 92(3) and violation of principles of natural justice in issuance of non speaking notices, the objection based on alternative remedy could not be sustained. The writ petition was therefore entertained and allowed to the limited extent of setting aside the impugned orders and remitting the matter for fresh consideration. [Paras 8, 17]Objection based on availability of alternative remedy rejected; writ petition entertained and allowed for limited relief.Final Conclusion: The Court set aside the six impugned FORM GST-RFD-06 orders dated 13.09.2023 for the listed periods, held that the FORM GST-RFD-08 notices were non speaking in violation of Rule 92(3) and principles of natural justice, rejected the objection of alternative remedy, and remitted the matters to the proper officer to issue proper FORM GST-RFD-08 notices, obtain replies and decide the refund claims afresh in accordance with law. 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 NoticesThe 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 JusticeThe 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 AgreementThe 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 AppealThe 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.