Gujarat HC: Refund Granted, Rejection Orders Quashed, but Vires of GST Circular Left Open

A group of Special Civil Applications led by Shah Paperplast Industries Ltd. questioned the orders-in-original and the corresponding appellate orders that had rejected their GST refund claims.

The petitions challenged the Order-in-Original and the subsequent Order-in-Appeal in various matters, which had rejected the petitioners’ claims for a refund. He also raised a distinct question regarding the applicability and requirement of issuing a show cause notice under Section 73 and Section 74 of the GST Act when the authority exercises its powers of review under Section 107(2) of the GST Act.

Issues Raised: Whether the orders refusing the petitioners’ refund claims were legally justified or ought to be set aside. Whether the Court should rule on the vires of para 2.2 of the Circular dated 06.07.2022 and the requirement of notice under Section 73/74 when invoking review powers under Section 107(2) of the GST Act.

HC’s Decision: The High Court allowed the batch of petitions and quashed both the orders-in-original and the orders-in-appeal. The court directed the authorities to release the refund amounts strictly in accordance with the law within 12 weeks from receiving the judgment.

The Court made it clear that it was not deciding the constitutional challenge to para 2.2 of the Circular dated 06.07.2022, its prospective application, or the issue of whether an SCN under Section 73/74 is necessary when review powers under Section 107(2) are exercised. These questions were expressly kept open for consideration in an appropriate future case.

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