Rejection of refund without providing opportunity of hearing is violation of principle of natural justice.

Case Law: M/S Chandni crafts vs Union of India, The Assistant Commissioner, CGST, Division A, Jodhpur [2023 (1) TMI 841- Rajasthan High Court]

Facts of the case:

• The petitioner claimed refund of accumulated input tax credit on account of exports under letter of undertaking in terms of provisions of Section 54(3) of the Central Goods and Services Tax Act, 2017 (the ACT). The Assistant Commissioner issued provisional refund order, partially sanctioning refund claims and rejecting the refund claims. Whereafter, the refund sanction / rejection orders were passed, inter-alia, rejecting the claims of the petitioner.
• Petitioner filed appeal before the Commissioner appeals where the petitioner gave reference to provisions of Section 54(3) of the CGST Act and Rule 92 of the CGST Rules that the refund could not have been rejected by the authority without providing opportunity of hearing, inasmuch as, the provisions of Rule 92(3) envisage issuance of notice in Form GST RFD-08 requiring the applicant to furnish a reply in Form GST RFD-09 and after considering the reply, order can be made in Form GST RFD-06 and that no application for refund shall be rejected without giving the applicant an opportunity of being heard. However, the said provision was violated by the authority.
• The appellate authority by its impugned order on the issue of violation of the principles of natural justice though held in favour of the petitioner, by observing that the natural justice has been duly followed during the appeal proceedings and the case is heard on the basis of merits, rejected the appeal.
• The petitioner has filed writ petition against the orders passed by the Assistant Commissioner, Central Goods & Service Tax, Division-A, Jodhpur and order passed by the Commissioner of Central Excise (Appeals) rejecting the appeal filed by the petitioner.

Points Considered for Judgment:

• Rule 92(3) of the Act clearly provides that no application for refund shall be rejected without giving the applicant an opportunity of being heard.
• The Hon’ble Supreme Court in 63 Moon Technologies Ltd. Vs Union of India, pointed out that breach of defect in observing rules of natural justice in the trail administrative body cannot generally be cured by observing natural justice at the appellate stage, particularly when a clear statutory right has been given at the trial stage of an assessment of compensation first by the prescribed authority and then a right of appeal to the appellate tribunal.
• The matter was remanded back to the adjudicating authority to follow the provisions of Rule 92(3) of the CGST Rules and thereafter pass an appropriate order in accordance with law.

SW point of view:

It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them.

Megha Dhankhar, Executive, Indirect Tax, SW India

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