BRIEF FACTS OF THE CASE:

M/s Formosa Synthetics, engaged in manufacturing of synthetic packaging material falling in various tariff headings of chapter 39 and chapter 63 of GST tariff. (hereinafter referred to as Appellant) is a registered entity under GST having GST no. 24AABCF5548A1Z3, in Gujarat. A fire accident broke out at the factory premises of the appellant on 29.05.2023, which led to loss of substantial inputs and capital goods. FIR and insurance claim report was timely filed. Due to loss of inputs and capital goods, appellant reversed the ITC on them in accordance to Sec. 18(6) of CGST Act read with Rule 40(2) of CGST Rules, 2017. At the time of preparing reconciliation statement, appellant found that there was inadvertent excess reversal of ITC of certain amount done by the Appellant. In pursuant to above excess reversal, Appellant filed a refund application in FORM GST RFD-01 under Sec. 54(1) read with Rule 89(1) along with all the requisite documents for claiming the excess reversal. Thereafter, a show cause notice (SCN) was issued in FORM GST RFD-08 dated 28.07.2025, in which several queries were raised and few documents were asked, majority of which were already submitted by the appellant at the time of filing refund application and few of which were already available with the learned adjudicating officer as they were accessible on portal. However, Refund application was rejected by the adjudicating authority in FORM GST RFD-06 dated 18.08.2025. Being aggrieved by the order, Appellant sought relief by moving an appeal before the Appellate Authority under Section 107 of CGST Act.

Key issues covered in the case:

Whether the adjudicating authority was justified to reject the refund claim application filed by the appellant duly supported by the documentary evidence?

Submissions by Appellant:

The Appellant submitted the following grounds in its favour : -

Order passed without granting personal hearing is not tenable:

Learned Authorised Representative submitted that the Impugned order was passed without providing any opportunity of personal hearing. Reference was given to the judgment of Hon’ble Supreme Court in the case of UMA NATH PANDEY v. STATE of U.P. [2009 (237) E.L.T. 241 (S.C.)] in which it was held that hearing is the essence of any decision and an order passed without hearing is void ab initio. This judgement makes a settled principle that any order passed without granting effective personal hearing is not sustainable.

Impugned order passed without considering the evidence on record is not tenable:

Learned C.A., authorised representative contended that the impugned order rejecting the refund application was passed without even considering the supporting documents submitted. The order mentioned only one discrepancy that no reply was submitted against the SCN. Merely writing one statement that reply was not filed is not a sufficient ground and the learned adjudicating authority was required to consider the documents submitted along with the refund application. Further, it is a settled principle that order cannot be passed ex-parte without considering the merits of the case. Reliance is placed on following landmark judgements:
Ganesh Kumar v. State of Bihar (2023) 9 Centax 366 (Pat.)/2023 (78) G.S.T.L. 85 (Pat.) [11.07.2023]. and
Hotel Rudra v. Deputy Commissioner, State Tax (2025) 32 Centax 312 (Cal.) [04.07.2025].
In view of the aforesaid judgements, even ex-parte order is also required to discuss the material available on records. In the instant case, material available on records has not been considered. Therefore, extending the benefit of the above-referred judgements, the impugned order is not justified.

Impugned order is a non-speaking and unreasoned order

The impugned order does not contain any discussion or finding on the documentary evidences, statutory provisions or reconciliation submitted by the appellant. No reasons have been assigned as to why the refund claim is not admissible on merits. The order therefore is a non-speaking order and unsustainable in law.

Show cause notice was issued with pre-conceived notion of rejecting the refund claim:

Learned Legal Counsel contended that the impugned order has denied the refund claim simply by mentioning that reply to SCN was not submitted. Impugned SCN was issued with a pre-determined intention. This is evidenced by the fact that the SCN had demanded the information/documents which were either already submitted with the refund application or were already accessible to learned adjudicating authority. In continuation of above, it was contended that impugned SCN was issued which demanded following documents:

Capital Goods Identification:

Appellant was asked to produce list of capital goods which were destroyed in fire. Further, a clarification was sought that whether capital goods were used exclusively for taxable supplies, or whether any of such capital goods were commonly used for exempt or personal purpose. With regards to the above mentioned requisite document, appellant contended that details of purchase invoices of capital goods were already submitted with the refund application. Further, taxpayer had reversed the ITC in respect of the capital goods exclusively used for the exempt supplies. Had the goods been used exclusively for exempt supplies, question of reversal does not arise at all. This is because credit on those capital goods was not taken which are exclusively used in manufacture of exempted goods.

Adjustment for reversal of excess ITC in subsequent returns:

A clarification was sought if any adjustment was done in subsequent returns to correct such reversal. In this regard, it was submitted that GSTR- 3B is uploaded on GST portal and it is accessible to the adjudicating authority. Thus, the required details could have been easily checked by the learned officer.

Accounting and Ledger making:

Copies of GSTR-3B and GSTR-2A/2B, Electronic Credit Ledger and Cash ledger were asked and to confirm if any Electronic Credit Ledger was re-credited later for the same amount. In this regard it was submitted that, these documents are available on GST portal and are easily accessible by the learned officer. However, it has not been done. Therefore, on the basis of above clarification it is very clearly demonstrated that SCN was issued with a pre-conceived notion to reject refund claim as all the documents were already available/accessible with the Revenue Department.

Thus the Impugned order stands invalid and should be set aside

Judgement & Findings:

Based on the submissions given by legal counsel, the appellate authority observed the following findings: -

Opportunity of hearing was not granted

Appellate authority held that based on the records available to it, it appears that the impugned order has been passed without granting such opportunity of personal hearing in the present case and has therefore resulted in a procedural deficiency in the adjudication process.

Refund rejected without examination of refund application and supporting documents:

Further, it was held that appellant has submitted detailed reversal workings identifying the invoices relating to the capital goods destroyed in the fire accident. The input tax credit invoices on which credit was taken originally on such capital goods. The detailed working sheets were also placed on record which contain invoice wise details such as description of capital goods, date of purchase, amount of input tax credit originally availed under CGST, SGST and IGST, number of quarters for which the capital goods were used prior to the fire incident and the proportionate credit required to be reversed in the reduction mechanism as prescribed under Rule 40 of CGST Rules, 2017.

Excess reversal of ITC duly established from records:

In continuation of above, it was observed that reversal computation placed on record further categorizes the affected assets into various groups including Plant and Machinery, Office Equipment and Electrical Installations. The Appellant submitted detailed invoice wise reconciliation and shows the credit originally availed on those assets and proportionate credit based on the unused portion of useful life which was required to be reversed. Further it was observed that Appellant demonstrated the credit reversal relating to finished goods and raw materials respectively destroyed in the fire accident which was reversed by producing the workings of the same. However, from the GST returns and Ledger extracts produced, it clearly showed that the amount of reversal done. Thus, it was crystal clear that the appellant had actually reversed higher amount. The difference amount in CGST and SGST head each was excess debited by the appellant and an application of refund was filed. But it was wrongly rejected by adjudication officer.

Assessee furnished all the documents and proofs which clearly depicts the fire incident:

Further, it was held that appellant has also furnished a Chartered Accountant certificate certifying that the said amount was not availed subsequently. It was further certified in same certificate that the same amount continued to remain debited from the electronic ledger and that there is no material available on record which indicates that the appellant has taken re-credit of the same.
In continuation of above, it was held that appellant has sufficiently demonstrated the occurrence of fire incident resulting in declaration of capital goods, the reversal of ITC in the GST returns.
Further, with respect to non-payment of GST on RCM basis on transactions with the advocate, it was held that documents submitted by the taxpayer clearly depict GST under RCM has been paid along with interest and penalty under Section 74(5) of CGST act and therefore demand of tax along with interest and penalty does not survive.

Principle of unjust enrichment not applicable

The refund claimed by the appellant pertains to excess reversal of its own input tax credit and not to any tax collected from customers. The burden of such excess debit has been borne entirely by the appellant. Hence, the doctrine of unjust enrichment has no application in the instant case.

In view of the facts, documentary evidences and statutory provisions, the rejection of refund claim is wholly unjustified. The appellant has satisfactorily established excess reversal of ITC and consequent excess debit in the electronic credit ledger. Therefore, the impugned order deserves to be set aside and refund deserves to be sanctioned.

AUTHOR’s COMMENT:

The Judgment given in the instant case is a strong reaffirmation of the principle of natural justice that an opportunity of hearing should be provided before adjudicating an order. Further, this judgement reinforces that evidences and proofs produced by the appellant, if clearly substantiates the contentions of the appellant then authorities are bound to consider those and any order passed without considering those evidences should be set aside. This judgement ensures that the revenue officials should act in fair manner to ensure neutrality and fair administration.

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PJ case law/2026-27/03

BRIEF FACTS OF THE CASE:

Key issues covered in the case:

Submissions by Appellant:

Judgement & Findings:

AUTHOR’s COMMENT:

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