Authorities reject Refund Application without giving Opportunity to Clear Deficiencies: Bombay HC restores application [Read Order]

In a recent ruling, the bench of Justice Abhay Ahuja and Justice Nitin Jamdar of Bombay High Court set aside the refund rejection order issued by the Goods and Services Tax (GST) authorities and restored the Form GST RFD-01.

The authorities should have provided the petitioner an ample opportunity to confront any possible flaws in the application. But the court observed, that instead they failed to do so. However, the authorities showed the same deficiencies as the grounds for rejection.

The Petitioner,  M/s. Knowledge Capital Services Private Limited, engaged in the business of providing information technology-enabled services and is granted a valid registration certificate.

They had exported its services under a Letter of Undertaking without payment of integrated tax in terms of section 16 (3) of the Integrated Goods and Services Tax (IGST) Act, 2017, which also permits to claim of refund of the unutilised input tax credit on supply of goods or services or both without payment of integrated tax.

The Section 16 of the IGST Act of 2017 refers to zero-rated supply, defined as the export of goods or services or both or supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.

The Petitioner claimed a refund of accumulated Input Tax Credit (ITC) on account of the export of services amounting to Rs.9,63,033 in terms of section 16 of the IGST Act of 2017 read with section 54 (3) of the Central Goods and Services Tax (CGST) Act, 2017. However, the authorities rejected the claim.

Thus, the petitioner has challenged the refund rejection issued by the Respondent No.3 (Assistant Commissioner of State Tax).

The petitioner contended that the procedure adopted by the Respondents to reject the refund claim is contrary to law and in breach of principles of natural justice, which are embodied in these statutory provisions.

The panel of judges acknowledged that the petitioner had received a GST RFD-02 acknowledgment with a Nil remark, implying that the refund claim had been accepted. Under the aforementioned acknowledgment, there were no deficiencies noted.

Additional emphasis was placed on the point that Rule 90 of the Central Goods and Services Tax (CGST)  Rules of 2017 specifies the process for accepting an application and Rule 92 of the CGST Rules of 2017 prescribes the procedure for issuing an order approving a refund.

Furthermore, no deficiency was pointed out, and the Petitioner did not get either of the deficiency memos that were supposed to be sent to him in accordance with Rule 90(3) of the Central Goods and Services Tax (CGST)  Rules of 2017 in Form GST RFD-03. Furthermore, no explanations were provided in the previously mentioned Form GST RFD-08.

The petitioner was not given an opportunity to rectify any discrepancies, and the petitioner was not given a chance to be heard before the reimbursement claim was rejected, therefore the High Court Division Bench found that the impugned order could not be upheld.

To Read the full text of the Order CLICK HERE

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