2025 (7) TMI 771 - HC - GST

Refund claim - rectification of deficiencies - appeal barred by time limitation - HELD THAT - The appeal is time barred as there is a delay of 91 days in filing the appeal. When the appellant/department alleges that the respondent/assessee was not diligent in processing his application they also should have been diligent in processing the appeal and should have filed the appeal within the period of limitation. So whatever applies to the assessee will equally apply to the department. Since the statute mandates a fresh refund application after rectification of deficiencies has to be filed we slightly modify the direction issued by the learned Single Bench by directing the respondent/writ petitioner to rectify all the deficiencies pointed out by the department which was placed before the learned writ court and recorded in the impugned order and upon fully rectifying the defects a fresh application for refund shall be uploaded by the respondent/writ petitioner within a period of two weeks from the date of receipt of the server copy of this order. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 91 days in filing the intra court appeal by the revenue department is liable to be condoned despite the appeal being time barred.

- Whether the department complied with the statutory mandate under Section 54 of the CGST Act and associated rules in communicating deficiencies in the refund applications to the assessee/respondent.

- Whether the respondent was given a fair opportunity to rectify the deficiencies in the refund applications as required under Rule 9(3) of the CGST Rules, 2017.

- Whether the direction of the learned Single Bench to permit the respondent to cure the deficiencies and re-submit the refund application for processing was justified.

- Whether the procedural deficiencies in the refund applications warranted rejection without opportunity for rectification.

- The scope and manner of compliance with the statutory provisions governing refund applications under the CGST Act and Rules, specifically the communication of deficiencies and the filing of fresh refund applications after rectification.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

The legal framework governing limitation periods for filing appeals is well established, requiring strict adherence unless sufficient cause is shown for delay. The department's appeal was delayed by 91 days beyond the prescribed period. The Court noted that the principle of parity applies: just as the department alleged lack of diligence on the part of the respondent in processing refund applications, the department itself was expected to exercise due diligence in filing the appeal within the limitation period.

Despite this, the Court exercised its discretion to condone the delay, having heard detailed submissions from the department's counsel. This exercise of discretion was justified on grounds not elaborated in detail but presumably considering the interests of justice and the nature of the dispute. The Court allowed the application for condonation of delay, thereby admitting the appeal for consideration on merits.

Communication of Deficiencies in Refund Applications

The respondent filed three refund applications in the prescribed statutory format (GST RFD - 01) for three consecutive financial years. The department issued deficiency memos through Form GST RFD - 03, indicating that "supporting documents attached are incomplete." However, the respondent contended that no specific details of the deficiencies were uploaded or communicated via the common portal, as evidenced by screenshots filed before the Court.

The Court emphasized that under subrule (3) of Rule 9 of the CGST Rules, 2017, it is a statutory mandate that when deficiencies are noticed, the proper officer must communicate such deficiencies electronically to the applicant through the common portal, requiring filing of a fresh refund application after rectification. Failure to communicate these deficiencies effectively denies the applicant the opportunity to comply, violating the principles of natural justice and statutory requirements.

The Court found it undisputed that the respondent was not made aware of the specific defects they were required to rectify, which rendered the department's rejection of the refund applications procedurally flawed.

Opportunity to Rectify Deficiencies and Filing of Fresh Refund Application

The deficiencies pointed out by the department, as recorded in the impugned order, were procedural rather than substantive in nature. The Court held that procedural deficiencies warrant an opportunity for the applicant to cure and re-submit the application rather than outright rejection.

The learned Single Bench's direction permitting the respondent to cure the deficiencies and re-submit the refund application was upheld as just and proper. The Court further modified the direction by mandating that the respondent must rectify all deficiencies pointed out by the department and file a fresh refund application within two weeks from the receipt of the order's server copy.

In the event the common portal is unable to accept the online filing, the respondent is permitted to file a manual application, which shall be processed in accordance with the directions issued by the learned Single Bench.

Application of Law to Facts and Treatment of Competing Arguments

The department argued that the respondent was not diligent in processing the refund applications and impliedly suggested that the deficiencies were communicated. The Court rejected this contention based on the evidence (portal screenshots) showing no effective communication of specific deficiencies.

The Court applied statutory provisions-Section 54(3) of the CGST Act and Rules 89(5) and 89(2)(h) of the CGST Rules, 2017-interpreting them in light of the principles of natural justice and procedural fairness. It concluded that the department's failure to communicate deficiencies as mandated precluded it from denying the refund without allowing rectification.

The Court balanced the competing interests by allowing the department's appeal to proceed (after condonation of delay) but ultimately dismissed it on merits, affirming the direction to permit rectification and re-submission of refund applications.

3. SIGNIFICANT HOLDINGS

"When the appellant/department alleges that the respondent/assessee was not diligent in processing his application, they also should have been diligent in processing the appeal and should have filed the appeal within the period of limitation."

"It is not in dispute that the assessee was not made known of the defects which they are required to rectify. This is not only required for the purpose of compliance of the principles of natural justice but it is a statutory mandate in terms of subrule (3) of Rule 9 which mandates that where any deficiencies are noticed the proper officer was communicated to the application in Form GST RFD - 03 through the common portal electronically, requiring him to file a fresh refund application after rectifying of such deficiencies."

"If the deficiencies noticed are not communicated to the assessee, obviously they would not be in a position to rectify the deficiencies and file a fresh refund application after rectification."

"The deficiencies are all not substantive in nature but more procedural in nature. If that be so, the assessee should be given an opportunity to rectify the deficiencies."

"The direction issued by the learned Single Bench was just and proper and calls for no interference."

Core principles established include:

• The requirement of strict compliance with limitation periods for filing appeals, subject to discretion for condonation of delay.
• The statutory obligation on the department to communicate specific deficiencies in refund applications electronically via the common portal, enabling the applicant to rectify them.
• The necessity of adherence to principles of natural justice in administrative proceedings, particularly in refund claims under the CGST Act.
• The distinction between procedural and substantive deficiencies, with procedural defects warranting an opportunity for rectification rather than outright rejection.
• The procedural mandate that a fresh refund application must be filed after rectification of deficiencies.

Final determinations:

• The delay in filing the appeal by the department was condoned.
• The department failed to comply with the statutory requirement to communicate deficiencies effectively to the respondent.
• The respondent was entitled to an opportunity to rectify the procedural deficiencies in the refund applications.
• The direction of the learned Single Bench to permit rectification and re-submission of refund applications was upheld with a modification prescribing a two-week timeline for filing a fresh application.
• The appeal was dismissed on merits without costs.
• The judgment was explicitly stated not to be a precedent but was decided on the peculiar facts and circumstances of the case.