GST Appellate Tribunal, Thane: In a batch of 39 appeals concerning partial rejection of accumulated input tax credit (ITC) refund claims on the ground of mismatch of ITC, the Division Bench of Ramesh Nair (Judicial Member) and Prallhad S. Paranjape (Technical Member) held that the rejection orders, passed without issuing a show-cause notice in Form GST RFD-08 and without any opportunity of hearing, were legally unsustainable. The Tribunal set aside the orders-in-original and the orders-in-appeal and remanded all the matters to the adjudicating authority for fresh adjudication, without going into the merits.
Background
The appellant is the Director of Lavino Kapur Cottons (P.) Ltd., a 100% Export Oriented Unit (EOU) registered under the Maharashtra Goods and Services Tax Act, 2017 (MGST Act, 2017), engaged in the manufacture and export of Absorbent Cotton of Pharmacopoeia grade. As the company exports its entire production without payment of domestic goods and services tax (GST), it claims refund of accumulated ITC under Section 16(3)(a), Integrated Goods and Services Tax Act, 2017 (IGST Act).
The batch of 39 appeals arose from orders-in-appeal passed by the Joint Commissioner of State Tax (Appeals), Thane Rural Division, which confirmed partial rejection of refund claims for various tax periods between June 2019 and September 2022. As the facts and questions of law were identical, the appeals were disposed of by a common order, with the refund claim for August 2020 treated as the lead case.
For August 2020, the company claimed a refund of ₹63,17,232 (CGST ₹23,25,889, SGST ₹23,25,889 and IGST ₹16,65,454). By an order in Form GST RFD-06 dated 12 January 2021, the adjudicating authority (Deputy Commissioner of State Tax, Tarapur) sanctioned the refund in part but rejected ₹18,09,402 (CGST ₹9,04,701 and SGST ₹9,04,701), citing only “Mismatch of ITC”. It was admitted that no notice in Form GST RFD-08 was issued, no reply in Form GST RFD-09 was invited, and no hearing was granted.
In appeal, the appellant filed written submissions pointing out the procedural violation and furnished a reconciliation chart relying on Notification No. 30/2020-Central Tax dated 3 April 2020 and Circular No. 142/12/2020-GST dated 9 October 2020, which permitted cumulative application of Rule 36(4), Central Goods and Services Tax Rules, 2017 (CGST Rules) for February 2020 to August 2020. The first appellate authority, by order dated 25 September 2023, itself recorded that Rule 92(3), CGST Rules had not been followed, yet dismissed the appeal on the ground that the appellant had not produced invoices of GSTR-3B non-filers and details of capital goods ITC at the appellate hearings.
Questions of Law
The Tribunal framed the following questions:
1. Whether partial rejection of a refund claim under Section 54, CGST/MGST Act, 2017, without issuing Form GST RFD-08 and without a hearing, violates the principles of natural justice and the mandate of Rule 92(3), CGST/MGST Rules, 2017;
2. Whether a foundational procedural defect, namely bypassing of the adjudication procedure by non-issuance of a show-cause notice, can be cured merely by affording a hearing at the appellate stage; and
3. Whether, in light of the admitted procedural infirmities, the matters warrant remand to the adjudicating authority for fresh proceedings in accordance with law.
Analysis and Decision
The Tribunal observed that the core issue was one of procedural propriety and natural justice. Referring to the text of Rule 92(3), CGST/MGST Rules, it held that the use of “shall” together with the absolute embargo in the proviso makes the provision unambiguous and mandatory, so that the adjudicating authority has no jurisdiction or discretion to reject a refund claim, wholly or partly, without first issuing Form GST RFD-08 and affording a hearing. Rule 92(3) requires the proper officer to issue Form GST RFD-08, seeking a reply in Form GST RFD-09 within 15 days, before an order in Form GST RFD-06, and its proviso bars rejection of a refund application without an opportunity of being heard. It was an admitted and undisputed fact that Form GST RFD-06 was issued directly.
Rejecting the Revenue’s plea of cure, the Tribunal held that the right to a show-cause notice and hearing before an adverse civil consequence is a fundamental statutory right rooted in the principle of audi alteram partem. The Tribunal observed that:
“A post-decisional hearing at the appellate stage cannot serve as a substitute for a pre-decisional statutory notice.”
By not issuing Form GST RFD-08, the Adjudicating Authority deprived the appellant of the right to know the precise grounds of the alleged “Mismatch of ITC” and to file a document-backed reply in Form GST RFD-09.
Relying on the Supreme Court’s decision in Kranti Associates (P) Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496, the Tribunal reiterated that quasi-judicial authorities must act fairly, follow the prescribed statutory procedure and pass reasoned orders, and that an order passed in defiance of a mandatory procedure is void ab initio. Since the order-in-original was unsustainable, the order-in-appeal built upon it also had to fall. The first appellate authority, having noted the breach of Rule 92(3), CGST/MGST Rules, ought to have remanded the matter instead of calling for documents and deciding on merits.
Without examining the merits of the ITC mismatch or the applicability of the COVID-19 relief circulars, the Tribunal set aside the impugned orders in all 39 appeals and remanded them to the adjudicating authority, keeping all issues open, for de novo processing.
Directions
If any part of the refund is found inadmissible on verification, the adjudicating authority is directed to:
1. issue a detailed show cause notice in Form GST RFD-08 setting out invoice-wise details of the alleged ITC mismatch or other grounds, subject to the provisions and timelines permitted by law;
2. grant sufficient opportunity to file a comprehensive reply in Form GST RFD-09, with reconciliation charts, circulars and corroborative evidence;
3. afford a personal hearing; and
4. pass a speaking and reasoned order in Form GST RFD-06, dealing with all submissions and evidence. The appellant was directed to cooperate fully and adduce all requisite evidence in the remand proceedings.
[Vikram Inderjit Kapur v. Deputy Commissioner of State Tax, APL. No. 12 to 50/THN/2026, decided on 22-10-2026]
Advocates who appeared in this case:
For the Appellant: Surinder Mehra, Chartered Accountant.
For the Respondent: Chhagan D. Jaybhay, Authorized Representative.
