Case Law Details
Maple Luxury Homes Vs State of Rajasthan and Ors. (Rajasthan High Court)
The Hon’ble Rajasthan High Court in the case of M/s. Maple Luxury Homes v. State of Rajasthan and Ors. [D.B. Civil Writ Petition No.17061/2023 dated April 18, 2024] held that the proper officer to disclose to the Assessee the reason for rejection of the GST Refund application with an object to invite a response, consider the same and pass an order.
Facts:
M/s. Maple Luxury Homes (“the Petition”) was engaged in the construction and development business. They also received advance consideration on account of the agreed supply of a flat from the buyer. They discharged its GST liability in the FORM GSTR-3B filed from time to time while submitting monthly returns. Further, before the completion of the construction, the booking of the flats was cancelled due to a casualty. According to the Petitioner, it was entitled to the GST Refund paid by them, on account of the supply having not being completed due to cancellation of the agreement.
An application for GST Refund was submitted on December 07, 2022, claiming the refund of GST paid for the months of October, 2020; December, 2020; March, 2021; June, 2021; September, 2021 & December, 2021.
The Authority (“the Respondent”) was not satisfied with the claim of the Petitioner. Therefore, a notice in Form GST-RFD-08 (“the SCN”) was issued to the Petitioner. The Petitioner submitted a reply to the SCN in Form GST-RFD-09. Subsequently, the Orders passed in FORM GST-RFD-06 dated September 13, 2023 (“the Impugned Orders”) in respect of different periods were passed holding that the Petitioner is not entitled to refund mainly on the ground that the Petitioner had passed on the incidence of tax to the buyers. Therefore, in such cases, it would not be entitled to the GST Refund.
Hence, aggrieved by the Impugned Orders, the Petitioner filed the present writ petition before the Hon’ble Rajasthan High Court.
Issue:
Whether it is mandatory to disclose the reasons for the rejection of the GST Refund?
Held:
The Hon’ble Rajasthan High Court in D.B. Civil Writ Petition No.17061/2023 held as under:
- Observed that, all the notices served to the Petitioner contained identical disclosure insofar as reasons for the proposed rejection of application that the Petitioner does not fall under the category of Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). It appears that the Respondent only completed an empty formality. It did not disclose why the Respondent formed a tentative satisfaction to reject the claim for the GST Refund.
- Noted that, if what has been stated in the SCN with regard to reasons is juxtaposed with the reasons that have been stated in the Impugned Orders to reject the claim of the GST Refund, it would be clear that what was stated in the Impugned Orders to reject the claim for the GST Refund was not at all stated not even briefly, in the SCN issued under Rule 92(3) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”). Thus, it is apparent that the issuance of the SCN was a farce and an empty formality by the Respondent rather than making it a meaningful exercise requiring the Petitioner to offer its explanation/reply to the reasons for the proposed rejection of application for claim of GST Refund.
- Opined that, the provisions contained in Rule 92(3) of the CGST Rules, incorporate the principles of natural justice as it mandates and obligates the proper officer to disclose to the applicant the reason for rejection of the GST Refund application with an object to invite response, consider the same and pass an order. Therefore, there is an apparent violation of statutory provisions incorporating principles of natural justice.
- Held that, the provisions contained in Rule 92(3) of the CGST Rules incorporating principles of natural justice were completely violated. If that be so, the objection to the maintainability of the petition on the ground of alternative remedy would not hold water. The said objection was accordingly rejected. For the reasons stated above, the Impugned Orders were set aside. The matter, however, was remitted to the proper officer for issuance of proper notice in FORM GST-RFD-08, obtaining a reply of the Petitioner and then pass such order as may be considered appropriate in accordance with law. Hence, the writ was allowed.
Conclusion: The Rajasthan High Court’s ruling in Maple Luxury Homes v. State of Rajasthan and Ors. underscores the significance of procedural fairness in tax matters. By mandating the disclosure of reasons for rejecting GST refund applications, the court ensures transparency and accountability in administrative actions.
This verdict serves as a reminder to tax authorities to adhere to statutory provisions and principles of natural justice. Proper disclosure of reasons empowers taxpayers to participate meaningfully in the adjudicatory process, fostering trust and confidence in the tax system.
Moving forward, tax authorities must uphold procedural fairness to maintain the integrity of tax administration and safeguard taxpayer rights. Compliance with Rule 92(3) of the CGST Rules is essential to prevent procedural irregularities and ensure equitable treatment for all taxpayers.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. Heard.
2. Challenge to order dated 13.09.2023 passed by the Assistant Commissioner, State Tax, Ward-II, Circle-D, Zone-II, Jaipur, Commercial Tax Department is premised mainly on the ground that the notices issued to the petitioner did not comply with the mandate of law. Challenge to the impugned order is also on the ground of violation of statutory scheme incorporating principles of natural justice.
3. Shorn of unnecessary details, the petitioner, which is engaged in the construction and development business, received advance consideration on account of agreed supply of a flat from the buyer and it discharged its GST liability in GSTR-3B filed from time to time while submitting monthly returns as detailed in para 2 of the writ petition. It is also a fact stated in the petition that before completion of the construction, booking of the flats was cancelled due to a casualty.
4. According to the petitioner, it was entitled to refund of GST paid by it, on account of supply having not been completed due to cancellation of the agreement. An application for refund was submitted on 07.12.2022 claiming refund of GST paid for the months of October, 2020; December, 2020; March, 2021; June, 2021; September, 2021 & December, 2021.
5. It appears that the authority was not satisfied with the claim of the petitioner, therefore, a notice in Form GST-RFD-08 was issued to the petitioner. The petitioner submitted reply to show cause notice in Form GST-RFD-09. Thereafter, impugned orders in respect of different period (as stated in Para 4 above) came to be passed, which are under challenge in this petition.
6. Learned counsel for the petitioner would submit that principles of natural justice have been incorporated in statutory scheme engrafted in Rule 92 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “the Rules of 2017”), which mandatorily require the competent authority that in case it is not satisfied with claim of refund, a notice stating the reasons for proposed rejection of claim is required to be given. However, it is contended, the show cause notice in FORM GST-RFD-08 was completely non-speaking and did not incorporate any reason whatsoever. On speculative basis, the petitioner submitted reply. It was only when the final order was passed that it emerged as to what was the reason for not accepting the claim for refund. Therefore, it is contended, the order passed by the authority is in apparent violation of principles of natural justice incorporated under statutory scheme of Rule 92 (3) of the Rules of 2017. Therefore, the impugned order may be set aside and the case be remitted for consideration afresh by the competent authority.
7. Per contra, learned counsel for respondents would submit that the petitioner is raising only technical grounds. He would submit that present is not a case where no opportunity of hearing was afforded. Learned counsel would submit that the authority having formed an opinion that present was not a case for grant of refund, issued a show cause notice strictly in accordance with the provisions of Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the Act of 2017”) read with provisions contained in Rule 92 of the Rules of 2017 in prescribed proforma of GST-RFD-08. The tentative reason for not accepting the claim was also clearly stated in the notice itself. The petitioner did reply to the show cause notice and gave its version as to how it is entitled to refund. The petitioner did not raise that the notice was non-speaking or did not disclose any reason. The authority upon due consideration of the reply of the petitioner proceeded to pass the order holding that the petitioner is not entitled to refund mainly on the ground that petitioner had passed on the incidence of tax to the buyers and therefore, in such cases, it would not be entitled to refund.
8. The next submission of learned counsel for respondents is that in any case, there exists an alternative and efficacious statutory remedy of appeal, therefore, the writ petition is not maintainable and the petitioner, if has any claim that it is entitled to refund and the reasons which have been assigned by the authority rejecting the claim are not tenable, it can always satisfy the appellate authority and pray for an order in its favour.
9. The scheme with regard to claim of refund is provided under Section 54 of the Act of 2017. In exercise of powers conferred under the Act of 2017, the Rules known as Central Goods and Services Tax Rules, 2017 have also been framed to carry out purposes of the Act of 2017. Chapter X of the Rules of 2017 makes exhaustive provisions regulating the procedure to be followed in the matter of consideration of application for refund.
10. Among other provisions, Rule 92(3) of the Rules of 2017 deals with procedure to be adopted by the officer when he is satisfied that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant. The said provision being relevant for decision making in the present case is extracted hereinbelow for ready reference:-
“92. Order sanctioning refund.-(1) xxxxx (1A) xxxxxx
(1A) xxxxxx
(2) xxxxxx
(3) 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 to the applicant, he shall issue a notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and after considering the reply, make an order in FORM GST RFD-06, sanctioning the amount of refund in whole or part, or rejecting the said refund claim and the said order shall be made available to the applicant electronically and the provisions of sub-rule (1) shall, mutatis mutandis, apply to the extent refund is allowed:
Provided that no application for refund shall be rejected without giving the applicant a reasonable opportunity of being heard.”
11. A fair, logical and rational interpretation of the aforesaid provision would be that in case proper officer is satisfied that claim for refund is not admissible either wholly or in part or in a case where it is found to be not payable for some other reasons, then it is required to issue a notice in FORM GST-RFD-08 to the applicant requiring him to furnish a reply in FORM GST-RFD-09 within a stipulated period. The aforesaid provision incorporates the principles of natural justice. The present is not a case where there is no statutory requirement of supplying to the applicant, proposed reasons for rejection of the claim. But for the aforesaid scheme of the Rule, the authority was not required to give any notice to the applicant communicating him the reasons for tentative decision to reject application for claim of refund. The Rule making authority in its wisdom has laid down that whenever there is a satisfaction arrived at to reject wholly or in part the claim for refund, a notice is required to be mandatorily issued clearly stating the reasons for such satisfaction arrived at by the proper officer. This provision has been included in the Rules of 2017 to ensure that before rejection of the claim, the applicant comes to know why his application is being rejected so that he could get an opportunity to satisfy the authority that the tentative reason/satisfaction is not correct. The object and purpose seems to minimise the error in the decision making process. It is for this reason that the principles of natural justice have been incorporated in the aforesaid provision mandatorily requiring the proper officer to communicate the reasons for such satisfaction, obtaining reply from the concerned applicant and then pass an order. The language of the provision contained in sub-Rule(3) of Rule 92 of the Rules of 2017 is clear that final order has to be passed after consideration of the reply.
12. Now we look into the notices which have been given to the petitioner (six in number). All notices contain identical disclosure insofar as reasons for proposed rejection of application are concerned, which is as under:-
“In the refund application you mention reason of refund excess of payment of tax. According to Section 54 of RGST/CGST Act 2017 you are not fall in this category. Tax payer who can claim category, tax payer who can claim the refund of accumulated ITC.”
In our considered view, that is no reason at all. The reason assigned, if we may say so, is as vague as it could be. It appears that authority only completed an empty formality. It did not disclose for what reasons the authority formed a tentative satisfaction to reject the claim for refund. The reason as disclosed, if we may say so, is mechanical and discloses nothing.
13. It appears that the petitioner-assessee, speculating as to what could possibly be the reason for rejection, submitted its reply.
14. The impugned orders passed by the authority in all the cases for the first time disclosed the reason why the authority was not satisfied that any refund is admissible in law. One of the impugned order dated 13.09.2023 (in relation to claim of refund towards GST paid for the month of October, 2020) reads as below:-
(8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-
(a) _ _ _ _ _ _ _ _
(b) _ _ _ _ _ _ _ _
(c) _ _ _ _ _ _ _ _
(d) _ _ _ _ _ _ _ _
(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person.
15. If what has been stated in the GST-RFD-08 notice with regard to reasons is juxtaposed with the reasons which have been assigned in the impugned order to reject the claim of refund, it would be clear that what was stated in the impugned order to reject claim for refund was not at all stated, even briefly, in the show cause notice issued under Rule 92(3) of the Rules of 2017. It is, thus, apparent that the issuance of show cause notice was a farce and an empty formality by the authority rather than making it a meaningful exercise requiring the assessee to offer its explanation/reply to the reasons for proposed rejection of application for claim of refund.
16. The provisions contained in Rule 92(3) of the Rules of 2017 incorporate the principles of natural justice as it mandates and obligates the proper officer to disclose to the applicant the reason for his tentative decision to reject refund application with an object to invite response, consider the same and pass the order. Therefore, there is apparent violation of statutory provisions incorporating principles of natural justice.
17. In view of the above, we are of the view that the provisions contained in Rule 92(3) of the Rules of 2017 incorporating principles of natural justice were completely violated. If that be so, the objection to the maintainability of the petition on the ground of alternative remedy would not hold water. The said objection is accordingly rejected. For the reasons stated above, the orders passed in FORM GST-RFD-06 dated 13.09.2023 bearing numbers ZD080923029414B, ZD080923029531D, ZD0809230295628, ZD0809230294563, ZD0809230294919 & ZD080923029580A are set aside. The matter, however, is remitted to the authority/ proper officer for issuance of proper notice in FORM GST-RFD-08, obtaining reply of the petitioner and then pass such order as may be considered appropriate in accordance with law.
18. The writ petition is, accordingly, allowed.
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