SCN issued by Incompetent Authority with respect to refund application: Delhi HC directs to consider Refund Application [Read Order]

In a significant case, the Delhi High Court while directing to consider the refund application observed that Show Cause Notice ( SCN ) issued by the incompetent authority with respect to the refund application filed by the petitioner.

The writ petition was filed by the petitioner Rahul Packaging, whose refund application was rejected by the respondent and passed an order under the Central Goods and Service Tax Act, 2017.

Adjudication order was preceded by Show Cause Notice proposing to reject the application seeking refund dated 23.11.2021 .

Before the division bench counsel for the petitioner submitted that the SCN was issued by the Superintendent.  The Superintendent was not competent to issue Show Cause Notice and it is only the officers of the rank of the Assistant Commissioner and above, who could have issued the Show Cause Notice.

Though the Show Cause Notice was issued by an incompetent officer, the adjudication order has been passed by an Assistant Commissioner, whose authority is not under challenge

It was observed by the court that the “Appellate Authority has clearly held that the impugned order i.e. the adjudication order dated 14.12.2021 was not sustainable as the Show Cause Notice was issued by a Range Superintendent and he was not the competent authority to do so.”

Therefore the Appellate Authority has held that the Adjudicating Authority has not applied its independent mind and rejected the refund merely on the basis of the report of Range Superintendent, which was bad in law.

However the course adopted by the Appellate Authority is not sustainable for the reason that once the Appellate Authority comes to the conclusion that the Show Cause Notice was issued by an officer who was not competent; reply was also considered by an incompetent authority and the Competent Authority had not applied its independent mind, the Appellate Authority could not have assumed original jurisdiction and proceeded further with the matter.

After analyzing the facts and arguments of both parties, a division bench of Justice Sanjeev Sachdeva  and Justice Ravinder Dudeja held that the course adopted by the Appellate Authority is not acceptable in law, the impugned order dated 17.04.2023 is set aside to the extent that it decides the claim of the petitioner on merits.

Therefore the bench directed the  appropriate authority to  consider the application of the petitioner seeking refund .

Ms. Aakriti Dhawan, Mr. Mayank Jain, Mr. Parmatma Singh and Mr. Madhur Jain, Advocates appeared for the petitioner and Ms. Neha Malik, Standing Counsel with Mr. Sahil Malik, Advocates appeared for the respondents.

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