Refund Claim Filed Within Time Rejected Without SCN: CESTAT Sets Aside Order for Natural Justice Violation [Read Order]

The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT)set aside an order rejecting a refund claim filed within time without issuing a show-cause notice (SCN), holding that the failure to provide an SCN violated natural justice and rendered the order legally unsustainable.

Rasi Seeds Private Limited,appellant-assessee,had filed a refund claim of ₹25,44,841 for service tax paid between July and September 2012. The claim, submitted on May 30, 2013, was returned due to missing challans and a worksheet. It was resubmitted on September 3, 2013, with all necessary details, covering service tax paid on Goods Transport Agency (GTA), Manpower Supply Service, and Import of Services.

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The refund application dated May 30, 2013, was within the two-year time limit under Section 11B of the Central Excise Act, 1944. The resubmission was prompted by the Revenue and could not be treated separately or rejected as time-barred.

The Adjudicating Authority(AA)cited changes in Notification No. 25/2012-ST, effective April 1, 2013, and ruled that the assessee’s seed production qualified as "agricultural produce," making the exemption inapplicable for the claimed period. The assessee argued that the amendment was clarificatory and should apply retrospectively. It also contended that the Revenue should have issued a show-cause notice before rejecting the claim, ensuring compliance with natural justice principles.

Read More: Refund for Unutilized CENVAT Credit Rejected without Proper Notice: CESTAT Orders Re-Examination Citing Violation of Natural Justice

The two member bench comprising P.Dinesha(Judicial Member) and Vasa Seshagiri Rao(Technical Member)  held that the Revenue should have issued a SCN before rejecting the refund claim. An SCN was essential to inform the assessee of the reasons for rejection and ensure compliance with natural justice. Calling for a personal hearing did not replace this requirement.

By failing to issue an SCN, the AA violated procedural fairness. The appellate tribunal found the order to be legally unsustainable and noted that the mistake was wrongly upheld in the appeal order. As a result, the CESTAT set aside the order.

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To Read the full text of the Order CLICK HERE

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