GST update No 238 on cryptic reasons for denying refund cannot render order as non-speaking

Claiming refunds from governmental authorities is a herculean task. The revenue authorities are reluctant to grant refund easily and consequently, reject the refund application filed by assessee either without acknowledging the reasons or on flimsy grounds. Moreover, many times, the reasons mentioned for rejection of refund claim are so short that they are not understandable by the assessees. On similar lines, one of the cases was reported before Madhya Pradesh High Court in the case of PRISM JOHNSON LIMITED V/S UNION OF INDIA. The decision imparted in this respect is the subject matter of discussion of our present update. The petitioner company filed a petition against the refund orders passed by the authorities for the rejection of accumulated credit of compensation cess. It was pleaded that the refund rejection order passed is non-speaking order and therefore, deserves to be quashed. The Counsel of revenue argued that the reasons recorded in refund rejection order are sufficient to save them from being sacrificed at the alter of natural justice. Furthermore, it was argued that refund application filed by the petitioner is time barred in accordance with provisions of Section 54 of CGST Act, 2017. It was argued that as per Section 16 of CGST Act, 2017, the refund claim is untenable in eyes of law. The contention was that since the petitioner failed to avail input tax credit on compensation cess on coal during the period, the refund claim pertaining to the said financial year is inadmissible. It was further argued that the refund application filed by the petitioner was under the wrong category i.e. “any other” instead of in “refund of unutilized ITC on account of export without payment of tax”. Objections were also raised regarding maintainability of the petition for failure to avail statutory remedy under Section 107 of the Act. The Court after analysing the situation in the present petition, held that it is obvious that the refund order contains reasons that refund claim is time barred and neither ITC of cess availed in GSTR3B nor accumulated of ITC of cess is available in credit ledger and the refund is inadmissible as per Circular No. 125/44/2019-GST dated 18.11.2019. Therefore, the refund is declined due to cryptic reasons but which are sufficient for the assessee to know the cause of rejection of refund claim. Although, the reasons can be elaborated, but this contention cannot render the order vitiated. Therefore, the petitioner cannot make submissions of not understanding the reasons for rejection of refund claim laid down by the adjudicating authority. Therefore, the appeal filed by the petitioner was dismissed on account of non-availment of alternate remedy and claim being time barred. The above decision is a setback for the business community wherein High Court refused to grant any relief by stating that cryptic reasons cannot turn the order as non-speaking. It was expected that the case would be remanded back to the lower authorities for reconsideration after following the principles of natural justice. It is often observed that the orders passed do not elaborate the reasons for adverse decision which poses difficulty for the taxpayer to defend their case. This decision will definitely increase the hardships for the taxpayers in the coming days.

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GST update No 238 on cryptic reasons for denying refund cannot render order as non-speaking

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