Chandni Crafts Vs Union of India (Rajasthan High Court)
GST: Natural justice violation in trial administrative body cannot be cured by observing natural justice at appellate stage
The authority conclusively found that the natural justice had not been followed by the adjudicating authority, however, on the basis that natural justice was duly followed during appeal proceedings, did not interfere with the order on account of the said aspect of violation of principle of natural justice.
It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them.
In the case of World Home Textiles (supra), the Madras High Court came to the following conclusion :-
“7. When Rule 92(3) of the CGST Rules, 2017, makes it clear that hearing is mandatory before rejecting any application for refund, the second respondent as well as the first respondent in their respective impugned orders have arbitrarily and by total non application of mind to the said Rule has rejected the petitioner’s application for refund. Therefore, the refund application submitted by the petitioner will have to be considered afresh on merits and in accordance with law after giving sufficient opportunity of hearing to the petitioner by the second respondent.”
The Hon’ble Supreme Court in 63 Moon Technologies Ltd. v. Union of India : (2019) 18 SCC 401, pointed out that breach or defect in observing Rules of natural justice in the trial administrative body cannot generally be cured by observing natural justice at the appellate stage, particularly when a clear statutory right has given at the trial stage of an assessment of compensation first by the prescribed authority and then a right of appeal to the appellate Tribunal.
In view of the above fact situation, wherein admittedly the principles of natural justice have been violated by the adjudicating authority and the appellate authority only on account of the fact that it had provided opportunity of hearing, did not interfere with the order of the adjudicating authority, both the orders cannot be sustained.
Refund of ITC cannot be rejected without providing an opportunity of being heard to the assessee
Rajasthan High Court has quashed and set aside the order rejecting the refund claim of accumulated Input Tax Credit (“ITC”) on the grounds that the assessee was not given the opportunity of hearing by the Revenue Department. Further viewed that it is a well settled law that a failure of natural justice in the authority of the first instance cannot be cured by the sufficiency of natural justice in the appellate body. While allowing the writ petition, the Court quashed the impugned order. The matter was remanded back to the adjudicating authority to follow the provisions of Rule 92(3) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”).
Facts:
M/s. Chandni Crafts (“the Petitioner”) had claimed a refund of accumulated ITC for the months of July 2017 and August 2017 amounting to INR 6,07,553/- and INR 8,78,605/-, as per Section 54(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) on account of export of goods under the letter of undertaking. The Revenue Department (“the Respondent”) partially sanctioned the refund claim vide order dated September 26, 2018, but rejected the refund claim for Integrated Goods and Service Tax (“IGST”) and Central Goods and Services Tax (“CGST”) vide Order-in- Original dated October 29, 2018 (“the OIO”).
Thereafter, the Petitioner preferred an appeal before the Appellate Authority, however, it was rejected vide the Order-in-Appeal (“the OIA”) on January 15, 2020.
Being aggrieved, this petition has been filed.
The Petitioner contended, that the refund was rejected without providing the opportunity for a hearing and that the Respondent has violated the provisions of Section 54(3) of the CGST Act and Rule 92 (3) of the CGST Rules. Further contended that, Rule 92(3) envisages issuance of notice in Form GST RFD-08 requiring the applicant to furnish a reply in Form GST RFD-09 and after considering the reply, the order can be made in Form GST RFD-06 and that no application for refund shall be rejected without giving the applicant an opportunity of being heard. The Petitioner stated that, the Appellate Authority had followed the principles of natural justice while passing the OIA.
The Respondent contended, that the Appellate Authority had considered all the issues raised by the Petitioner and that the mere fact that the respondent did not provide an opportunity of hearing to the Petitioner cannot be the sole reason for questioning the validity of the OIO and the OIA.
Issue:
Whether the rejection of the Petitioner’s refund claim for accumulated ITC without providing an opportunity of hearing, violated the provisions of Section 54(3) of the CGST Act and Rule 92(3) of the CGST Rules?
Held:
The Hon’ble Rajasthan High Court in [D. B. Civil Writ Petition No. 5460/2020] held as under:
