GST Adjudicating Authority cannot Pass Order without Examining Material Adduced by Appellant to Contest Case: Patna HC [Read Order]

The petitioner, Binay Rice Mill, an entity trading in the name of Sharda Ram Industries, represented through its proprietor Binay Kumar Singh had approached the Patna High Court challenging the rejection of its refund application for tax paid on procurement of capital goods under the Export Promotion Capital Goods (EPCG) Scheme.

The petitioner imported capital goods under invoices dated 01 September 2022 and subsequent dates. On 08 May 2023, the petitioner filed an application seeking refund of the tax paid on such capital goods under the EPCG Scheme in terms of Section 54(1) of the GST Act and applicable rules and circulars.

The refund application applied for by the petitioner was first rejected by the Joint Commissioner of State Tax, Bhagalpur Circle-1, through an order dated 27 July 2023 on the grounds that the petitioner had not complied with the show cause notice dated 16.06.2023. However, such an order had been passed by the adjudicating authority without adequately dealing with the detailed reply filed by the petitioner on 28 June 2023.

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The petitioner then appealed the order before the Additional Commissioner of State Tax (Appeal), Bhagalpur Division, who also dismissed the case on 21 May 2024.

As the GST Tribunal was not functional, the petitioner invoked the writ jurisdiction of the High Court.

The petitioner, represented by D.V. Pathy, Sadashiv Tiwari, Prachi Pallavi and Hiresh Karan submitted that the adjudicating authority had failed to pass a reasoned and speaking order and failed to take into account the reply filed by the petitioner, including their reliance on several circulars issued by the Central Board of Indirect Taxes and Customs.

It was further argued that such omission deprived the petitioner of an effective right of appeal.

The respondent state and gst authorities were represented by Vivek Prasad, Sanjay Kumar AC and Roona Ac stated that they were not in a position to apprise the Court whether the order of the adjudicating authority dated 27.07.2023 was in consonance with the show cause notice and the reasons assigned, and whether it had considered the reply filed by the petitioner.

However, the respondent counsel sought to sustain the action of the adjudicating authority order in the guise of decision of the appellate authority.

The Division Bench of Justice P. B. Bajanthri and Justice S. B. Pd. Singh observed that the adjudicating authority is bound to take into account the reply and supporting documents placed before it and to provide clear reasons as to why such submissions made by the appellant before it were accepted or rejected.

The Court noted that the order dated 27 July 2023 was bereft of consideration of the reply issued by the petitioner and thus suffered from violation of principles of natural justice.

The Court referred to the Supreme Court decision in Oryx Fisheries Pvt. Ltd. v. Union of India (2010) where it was held that “Insistence on reason is a requirement for both judicial accountability and transparency”.

The Patna High Court reiterated that quasi-judicial authorities are obliged to render reasoned and speaking orders, and that reasons should have been assigned by the adjudicating authority to the extent whether the circulars adduced by the petitioner were applicable to their case or not.

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Accordingly, the High Court held that the orders of both the adjudicating authority and the appellate authority were unsustainable, proceeding to quash the impugned orders while remanding the matter back to the adjudicating authority.

It was further directed that the case may be decided afresh after considering the petitioner’s reply dated 28 June 2023 and any additional reply that may be filed within three weeks, following which a reasoned order may be passed within four months.

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