GST Refund claim cannot simply be rejected without explaining alleged dubious transactions: HC

The writ-applicant is a ‘Partnership Firm’. The firm is engaged in the business of trading of tobacco.

A Show-cause notice (SCN) was issued to the firm on 11.01.2020 in the Form GST-RFD-08 that why the GST refund application filed by the firm should not be rejected.

The plain reading of the SCN would indicate that the authority concerned proposed to reject the refund application essentially on the ground that the documents in the form of the purchase order received from the foreign buyer, copy of insurance, proof of outside supplies and the bank statement of each account maintained in different banks were not furnished.

The firm upon receipt of the show-cause notice as above replied to the same in the Form GST-RFD-09. Whatever documents were required, were furnished.

The authority concerned in Form GST RFD-06 rejected the application filed by the firm for the refund of the Input Tax Credit (ITC) without giving proper reasons or an opportunity of being heard.

Order of High Court:

5. The impugned order in the Form GST RFD-06 deserves to be quashed and set aside only on one ground and i.e. the impugned order travels beyond the scope of the show-cause notice. We take notice of the fact that in the impugned order, the authority concerned has gone into minutest of the details of the transactions of the writ-applicant– firm with the other companies. These transactions have been found to be doubtful. In such circumstances, the authority thought fit to reject the claim of the writ-applicant firm for the refund of the ITC.

6. In the show-cause notice, all that has been stated is that few relevant documents have not been furnished and in the absence of those, it was not possible for the authority to process the application for the refund of the ITC. There is not a single allegation beyond this in the show-cause notice. Upon the documents being furnished by the writ-applicant and while going through those documents, if the authority had any doubts with respect to all such transactions, it was expected of the authority to once again give an opportunity to the writ-applicant to explain all such alleged dubious transactions. The authority could not have straightway proceeded to pass the impugned order incorporating all the details and taking the writ-applicant firm by a surprise.

7. This litigation could have been easily avoided had the authority applied its mind.

8. In the result, this writ application succeeds and is hereby allowed.