Refund deficiency memo under GST cannot decide merits; substantive rejection must follow the prescribed adjudication process.

Rule 90(3) of the CGST Rules permits a deficiency memo only to identify defects in a refund application and require a fresh filing after rectification; it does not authorise a final decision on the substantive admissibility of refund. The proper officer must confine the communication to procedural deficiencies and then process the claim under the prescribed refund adjudication mechanism, where rejection can occur only in accordance with Rule 92 and after notice and hearing. A memo stating that refund is not allowable merely because payment was made through DRC-03 exceeded the limited scope of Rule 90(3) and was therefore not sustainable.

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Issues: Whether the refund application could be rejected at the stage of deficiency memo under Rule 90(3) of the Central Goods and Services Tax Rules, 2017, and whether the proper officer was required to restrict the communication to deficiencies and then decide the refund claim in accordance with the prescribed refund procedure.

Analysis: Rule 89 and Rule 90 prescribe the procedure for filing a refund application in FORM GST RFD-01, scrutiny for completeness, and communication of deficiencies in FORM GST RFD-03, if any. A deficiency memo under Rule 90(3) is intended only to point out defects and require a fresh application after rectification; it is not the stage for finally adjudicating entitlement to refund. The decision whether the refund is admissible or not is contemplated later under the refund adjudication mechanism, particularly under Rule 92, where rejection can follow only after the prescribed notice and opportunity of hearing. The impugned memo went beyond the limited function of Rule 90(3) by recording that refund was not allowable merely because payment had been made through DRC-03.

Conclusion: The deficiency memo could not validly reject the refund claim on merits, and the petitioner succeeded on this issue.

Final Conclusion: The impugned deficiency memo was set aside and the refund application was sent back for fresh consideration in accordance with the GST refund procedure.

Ratio Decidendi: A deficiency memo under Rule 90(3) can only communicate procedural defects in a refund application and cannot be used to decide the substantive admissibility of the refund claim, which must be determined under the prescribed adjudicatory refund process.

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