Case Law Details
Tvl. Orange Sorting Machines (India) Private Limited Vs Assistant Commissioner (Madras High Court)
Refund rejection order not proper when required information for defending the claim made is not provided to the Appellant: Madras High Court
Summary: The Hon’ble Madras High Court, in Tvl. Orange Sorting Machines (India) Pvt. Ltd. vs. Assistant Commissioner (W.P. No. 4211 of 2024, dated February 23, 2024), quashed an order demanding repayment of an alleged erroneous refund under the inverted duty structure. The Court found that the refund rejection order lacked the essential details required for the petitioner to present an adequate defense, thus violating the principle of natural justice. The case revolved around a show-cause notice (SCN) issued by the tax authorities claiming an excess refund of ₹7,51,961 but failing to provide a breakup of the amount. Despite repeated requests, the authorities issued an order demanding ₹3,84,922 without offering clarity on the calculations.The Court observed that the absence of necessary details in the SCN rendered it impossible for the petitioner to respond meaningfully. Upholding the legal maxim Audi Alteram Partem, which requires that both parties be given a fair opportunity to present their case, the Court concluded that the SCN and the impugned order were inadequate and procedurally flawed. It quashed the order and directed the authorities to issue a fresh SCN with complete particulars, ensuring compliance with the principles of natural justice. This judgment underscores the necessity for tax authorities to provide adequate information in disputes to facilitate a fair adjudication process.
The Hon’ble Madras High Court in the case Tvl. Orange Sorting Machines (India) (P.) Ltd. v. Additional Commissioner [W.P. No. 4211 of 2024 dated February 23, 2024] quashed the impugned order as the Department failed to provide a breakup of the amount demanded, thereby holding that the refund rejection order is not proper when required information for defending the claim made is not provided to the Applicant.
Facts:
Tvl. Orange Sorting Machines (India) (P.) Ltd (“the Petitioner”) is engaged in the manufacturing of machines and claimed refunds of accumulated Input Tax Credit (“ITC”) under inverted duty structure. Thereafter, a show-cause notice dated September 22, 2023 (“the SCN”) was issued claiming Rs. 7,51,961 it was specified as an erroneous refund. Subsequently, the Petitioner in its reply filed, requested for a breakup of the amount so that they can reply notice appropriately. The Respondent without providing a breakup of the claimed amount, issued order dated December 29, 2023 (“the Impugned Order”) demanding payment of a total sum of Rs.3,84,922/- towards erroneous refund.
Issue:
Whether refund rejection order is proper when required information for defending the claim made is not provided to the Appellant?
Held:
The Hon’ble Madras High Court in W.P. No. 4211 of 2024 held as under
- Noted that, unless SCN does not provide the particulars of the claimed amount, it would not be possible for the petitioner to reply in a meaningful manner to the SCN.
- Opined that, the Impugned Order and Notice are bereft of particulars and need to be interfered with.
- Held that, the Impugned Order is quashed and matter is remitted back for reconsideration.
Our comments:
The Hon’ble High Court affirmed the principle laid out legal maxim of “Audi Alteram Partem” i.e. let the other party be heard. The chance of being heard does not only mean letting the other party speak but to also providing the relevant information for the other party to provide a meaningful defence.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner challenges an order dated 29.12.2023 by which it was held that the petitioner is liable to pay a total sum of Rs.3,84,922/- towards an erroneous refund.
2. The petitioner asserts that it is engaged in manufacturing machines. In relation to the purchase of raw materials for such activity, it is stated that there is accumulation of unutilized ITC on account of inverted duty structure. Consequently, claims for refund were made and received. Pursuant to a show cause notice dated 22.09.2023, the petitioner replied and requested for a break-up of the sum of Rs.7,51,961/-, which was specified therein as being an erroneous refund. The respondents did not provide the requested break-up and instead proceeded to issue the impugned order.
3. By inviting my attention to the show cause notice, learned counsel for the petitioner submits that said notice is bereft of particulars as to how the sum of Rs.3,75,981/- was arrived at. Therefore, he states that the petitioner asked for particulars so as to enable the petitioner to send an appropriate reply. Without providing any particulars, he submits that the impugned order was issued.
4. Mr. T.N.C.Kaushik, learned Additional Government Pleader, accepts notice for the respondents. By referring to both the intimation and the show cause notice, he submits that it is stated therein that a sum of Rs.7,51,961/- was the excess refund on account of inverted duty structure.
5. The show cause notice does not provide any particulars beyond stating that an excess refund of Rs.7,51,961/- was made to the petitioner on account of inverted duty structure. By reply dated 18.12.2023, the petitioner pointed that the break-up for the amount claimed in the show cause notice was not provided in spite of follow up. Therefore, the petitioner once again requested for particulars. The impugned order was issued without providing such particulars. On examining the impugned order, it is noticeable that the only reason specified therein is that the CAG para pointed out that the taxpayer was issued excess refund on account of inverted duty structure and that the excess amount is Rs.7,51,961/-.
6. Unless the show cause notice sets out sufficient particulars to enable the assessee to understand the nature of claim being made against such assessee, it is not possible for such assessee to respond in a meaningful way to the show cause notice. In this case, as discussed above, both the show cause notice and the impugned order are bereft of particulars. Therefore, the order calls for interference.
7. Hence, the impugned order is quashed and the matter is remanded for re-consideration. The respondents are directed to issue a fresh show cause notice to the petitioner setting out all relevant particulars so as to enable the petitioner to respond thereto. Further proceedings shall be taken thereafter in accordance with law.
8. W.P.No.4211 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.4524 and 4526 of 2024 are closed.
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