Rejecting GST ITC Refund on Basis of Extraneous Material: Patna HC Directs Rejection Order be treated as SCN for pursuing Proceedings [Read Order]

The petitioner had sought refund of ITC on export of goods without payment of integrated tax amounting to ₹44,44,328/-. The refund application was rejected by the Joint Commissioner of State Tax, Kishanganj Charge, Bihar.

The petitioner had submitted material information except stating that agreement between the petitioner and buyers, which by itself is not mandatory for issuing refunds. However, the rejection order showed that the joint commissioner had relied on extraneous material to arrive at their conclusion.

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Aggrieved, the petitioner approached the appellate authority who, by order dated 22.07.2024, upheld the rejection by the Joint Commissioner.

Consequently, the petitioner moved the present petition before the Patna High Court.

The petitioner, represented by Vinay Shraff, Puneet Siddhartha, Amit Kumar Singh, Aryan Sinha, Amit Kr. Singh, and Md. Zeeshan Khan contended that the petitioner had submitted reply to the show-cause notice along with all the material information, but obtained from stating that there is no agreement between the petitioner and buyers - which by itself is not a mandatory requirement for the purpose of claiming refund

It was further contended that the refund rejection order was passed on the basis of extraneous material which were not part and parcel of the SCN.

Standing counsel appearing for the respondent submitted that called for no interference to the impugned order since sufficient material has been shown in the order of refund of rejection and that it was the duty of the petitioner to furnish those material information which were shortcoming.

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The Bench of Justice P. B. Bajanthri and Justice Alok Kumar Sinha observed that the refund rejection was indeed based on extraneous material that had not been included in the show-cause notice, thereby violating principles of natural justice.

The Division Bench further referenced the Supreme Court decision in Oryx Fisheries Private Ltd. vs. Union of India & Ors. (2010) where it was held that quasi-judicial authorities must base their decisions on disclosed materials and give affected parties an opportunity to respond. Another interesting observation in Oryx Fisheries (supra) was where the Apex Court held that “principle of justice that justice must not only be done it must also appear to be done as well”.

Accordingly, the Patna High Court held that the refund rejection order dated 05.12.2023 shall be treated as a further show-cause notice while directing the petitioner to file a comprehensive explanation within eight weeks, after which the Joint Commissioner must pass a detailed speaking order addressing the petitioner’s contentions.

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