Failure to Issue Notice pursuant to Refund Adjustment Order: Bombay HC directs GST authorities to reconsider Refund application

A Division Bench of Bombay High Court directed the appropriate authorities to consider the refund application after giving an opportunity of hearing and after considering the submissions of the petitioner, pass a reasoned order in accordance with law.

The bench of Justice Abhay Ahuja and Justice Nitin Jamdar in view of the breach of the principles of natural justice as noted above has set aside the Defect Notice and the Refund Adjustment Order.

The petitioner M/s TML Business Services Limited is a limited company engaged in procuring vehicles from Tata Motors Limited (“TML”) and selling them to dealers within and outside the State of Maharashtra.

Pursuant to an assessment under Section 23 of the Maharashtra Value Added Tax Act, 2002 for the financial year 2010-2011, the Assessing Officer passed an Assessment Order raising a demand of Rs. 17,76,93,422 including tax and interest. Aggrieved by the same, the Petitioner filed an appeal which resulted in a reduced demand of Rs. 14,00,74,890.

The petitioner had informed the respondent authorities that it intended to use the Amnesty Scheme, so it withdrew its Form-314 notification that it intended to appeal the order for the fiscal year 2010–2011. It also requested that the refund of Rs. 10,69,89,606 for the fiscal year 2011–2012 be postponed until it submitted an application under the Amnesty Scheme.

Since the petitioner had already submitted an application to settle the dues for the year 2010-2011 in accordance with the Amnesty Scheme’s provisions, the petitioner argued that the respondents were not permitted to adjust the refund of Rs. 10,69,89,606 against the liability of Rs. 14,00,74,890 for the year.

The Maharashtra Value Added Tax Act additionally obliged the responders to notify the assessee before making any adjustments to refunds, the court noted, adding that actions unfavourable to a party cannot be conducted without providing the party with appropriate notice and a chance to defend.

Additionally, there is just one day between the Defect Notice and the Refund Adjustment Order, which would not have given the Petitioner enough time to even ask the Authorities to address his complaint. Thus the bench remanded the matter to the respondent authorities.

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