Natural justice in GST refund proceedings requires a real opportunity to respond before rejection of a portal-issued notice.

Refund of export proceeds treated as zero-rated supply under the GST framework was rejected after a system-generated application and show-cause notice were communicated only through the common portal. The HC found that the refund module could be accessed only through the portal and that, in the circumstances, the taxpayers may not have had a realistic opportunity to notice or respond to the notice. On these peculiar facts, the rejection was held to offend natural justice. The refund rejection order was set aside, the taxpayers were allowed to reply to the show-cause notice, and the proper officer was directed to reconsider the refund application thereafter.

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Issues: Whether the refund rejection order passed under Rule 96 of the Central Goods and Services Tax Rules, 2017 could be sustained when the system-generated refund application and show-cause notice were communicated only through the common portal and the petitioner claimed to have had no effective opportunity to respond.

Analysis: The refund claim arose from exports treated as zero-rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017 and the refund mechanism under Rule 96 of the Central Goods and Services Tax Rules, 2017. The refund was withheld, a system-generated application in Form GST RFD-01 was created, and notice was said to have been issued through the portal. However, the Court found that the application could be accessed only through the refund module and that the petitioners, awaiting credit of refund in their bank account, may not have had a realistic opportunity to notice and to the show-cause notice. In these peculiar facts, the benefit of doubt was given to the petitioners on the ground of denial of proper opportunity.

Conclusion: The refund rejection order was set aside for violation of natural justice, and the petitioners were permitted to respond to the show-cause notice, after which the refund application was to be reconsidered by the proper officer.

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