GST refund claim for tax paid on assignment-rights transfer: deficiency memo u/r 90(3) invalid; claim revived.

The dominant issue was whether a refund application under the GST regime could be rejected through a deficiency memo under Rule 90(3) on the ground that no GST Council notification/circular existed regarding refund of GST paid on transfer of assignment rights. The HC held that such a ground could not sustain the deficiency memo, as Rule 90(3) is confined to pointing out deficiencies and does not justify rejection on an extraneous premise unsupported by law. Consequently, the deficiency memo was quashed, the refund application was revived, and the tax authorities were directed to decide the revived refund claim in accordance with law within three weeks.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the deficiency memo in Form GST RFD-03 rejecting/returning the refund application on the ground that no notification/circular of the GST Council exists regarding refund was sustainable in law, and liable to be quashed.

(ii) Whether, upon quashing the deficiency memo, the refund application was required to be revived and decided afresh within a fixed time in accordance with law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of the deficiency memo in Form GST RFD-03 rejecting/returning the refund application for want of GST Council notification/circular

Legal framework: The Court noted that the deficiency memo was issued under Rule 90(3) of the Goods and Services Tax Rules, 2017, in Form GST RFD-03.

Interpretation and reasoning: The Court recorded the statement made on instructions by the respondent's counsel that the impugned deficiency memo dated 15.07.2025 "may be quashed" and that the authorities would consider the petitioner's refund application and pass a fresh order. In view of this express stand, the Court proceeded to set aside the memo rather than sustain a rejection/return of the refund claim on the stated ground.

Conclusion: The deficiency memo in Form GST RFD-03 dated 15.07.2025 was quashed and set aside.

Issue (ii): Revival of the refund application and directions for fresh decision within time

Legal framework: The Court dealt with the refund application filed in Form GST RFD-01 dated 14.07.2025 and directed that the post-quash decision be taken "in accordance with law".

Interpretation and reasoning: Having set aside the deficiency memo, the Court held that the refund application should "stand revived". To ensure timely adjudication after revival, the Court issued a mandatory direction to the respondent authorities to pass necessary orders within a stipulated period from receipt of the application.

Conclusion: The refund application dated 14.07.2025 was revived, and the respondent authorities were directed to pass fresh orders within three weeks from receipt of the application, in accordance with law.

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