Refund application cannot be rejected without giving applicant an opportunity of being heard

Infosys Limited Vs Deputy Commissioner of SGST (Telangana High Court)

In a case where the proper officer is satisfied for reasons to be recorded in writing that the whole or any part of the amount claimed as refund is not admissible or is not payable, he shall issue notice to the applicant requiring filing of reply within 15 days of receipt of notice and after considering the reply make an order sanctioning the amount of refund in whole or in part or rejecting the refund claim which order shall be made available to the applicant. As per the proviso, an application for refund shall not be rejected without giving the applicant an opportunity of being heard. Therefore, there is a clear legal mandate that if an application for refund is to be rejected, the same can only be done after giving the applicant an opportunity of being heard.

The expression ‘opportunity of being heard’ is not an expression of empty formality. It is a part of the well-recognized principle of audi alteram partem which forms the fulcrum of natural justice and is central to fair procedure. The principle is that no one should be condemned unheard. It is not necessary to delve deep into the expression save and except to say that by way of judicial pronouncements the said expression has been made central to the decision making process, breach of which would be construed to be violation of the principles of natural justice thus adversely affecting the decision making process; a ground for invoking the power of judicial review.

When the law requires that no application for refund shall be rejected without giving the applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for refund where no time-limit is fixed vis-à-vis rejection of claim. Under sub­section (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects without there being a corresponding provision for rejection of application not complete in all respects.

In BA CONTINUUM INDIA (P) LIMITED (supra), the Bombay High Court had elaborately dealt with the aforesaid provision and, in the facts and circumstances of that case, came to the conclusion that as no hearing was granted to the petitioner, rejection of refund order would be in violation of the proviso to sub-rule (3) of Rule 92 of the CGST Rules and also in violation of the principles of natural justice. The contention advanced by the Revenue about availability of alternative remedy of appeal was repelled on the ground that an order, which is in violation of principles of natural justice, would be non est in law. It is settled law that if there is violation of the principles of natural justice, then the High Court will invoke its extraordinary jurisdiction under Article 226 of the Constitution of India notwithstanding the availability of the alternative remedy of appeal.

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