Proper Officer has to mandatorily disclose the reasons for the rejection of the GST Refund

[CA Bimal Jain]

The Hon’ble Rajasthan High Court in the case of M/S MAPLE LUXURY HOMES VERSUS STATE OF RAJASTHAN, UNION OF INDIA. [2024 (5) TMI 717 - RAJASTHAN HIGH COURT] 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 M/S MAPLE LUXURY HOMES VERSUS STATE OF RAJASTHAN, UNION OF INDIA. [2024 (5) TMI 717 - RAJASTHAN HIGH COURT] 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.

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