GST Update No 215 on rejection of refund of amount higher than as mentioned in SCN

The discussions and debates on validity of issues alleged in the show cause notice in respect of sanctioning of refunds has been a subject matter of litigation since long. The tug-of-war between the departmental officers and taxpayers remain intact. It is well known fact that collecting the earned refunds from the revenue department is a not an easy task. On the similar lines, one of the case was reported before Gujarat High Court in the case of M/s TTEC India Solutions Private Limited V/s Deputy Commissioner of Sales Tax. The decision imparted in this case is subject matter of our present update.

The petitioner is engaged in providing customer solution service outside India i.e. in export of service. The services were exported under bond without payment of IGST and therefore, claimed refund of unutilised input tax credit of Rs. 2,84,04,175/- from Feb, 2019 to Mar, 20. The refund claim was supported by copies of Foreign Inward Remittance Certificates. The revenue authorities issued a show cause notice rejecting the refund claim of Rs. 36,85,893/- only. The reply filed by petitioner was not adhered to. During personal hearing, the concerned officer was on leave and therefore, the case was transferred to other officer, who was required to provide an opportunity of hearing. Further, due to ongoing covid-19 pandemic, the request made by petitioner of virtual hearing was also not recognised. However, the new officer passed an order rejecting refund claim of Rs. 2,84,04,175/- without providing opportunity of hearing. To this, the petitioner pointed out the apparent mistake and applied for rectification as well but no response was received from the respondent. Therefore, appeal was preferred before Appellate Authority, which was not listed and thereafter, appeal is preferred before this Court.

The Counsel of the petitioner argued that there is violation of principles of natural justice. Further, it was argued that the show cause notice itself covers the limited amount rejecting the refund claim of Rs. 36,85,893/- and therefore, entire refund amount cannot be rejected.

The Court held that impugned order deserves to be quashed and set aside. The matter was remanded back to the concerned office. It was held that it is settled principle that once a show cause notice for refund claim is issued at the best, the refund can be rejected only for the refund amount for which show cause notice is issued and not for the higher amount.

The Court held that it is settled law the impugned order cannot travel beyond the show cause notice. It was directed to the officer to follow the principles of natural justice and directed to decide the matter in accordance with provisions of law. Further, it was ordered to do virtual hearing in case personal hearing is not possible.

The above decision sets out correct position of law. There had been catena of cases in erstwhile GST regime as well wherein it is held that the order cannot travel beyond the allegations raised in show cause notice. For an instance,CESTAT Mumbai in the case of M/s R.R. Paints (P.) Ltd. V/s Commissioner of Central Excise, Mumbai-III held the same point of view. The revenue authorities should understand this basic ideology that the issues not raised in SCN cannot be imported into adjudication or appeal order failing which will render the order the impugned and bad in eyes of law. It is high time that these binding judicial pronouncements should be followed appropriately by the departmental authorities failing which will result in unwanted litigations and adjudications.

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GST Update No 215 on rejection of refund of amount higher than as mentioned in SCN

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