The rejection of a refund application without issuing a mandatory deficiency memo or providing an opportunity for a hearing is procedurally invalid. Such non-compliance renders the rejection order void ab initio, necessitating a fresh consideration of the claim on its merits.

Oral Judgment (Per G.S. Kulkarni, J.)

1. These petitions, filed by the common petitioner, involve common questions of law and fact, hence they are being disposed of by this common order. Writ Petition (L) No. 36200 of 2023 is argued as a lead matter. For convenience, we refer to the facts of the said petition in adjudicating the present batch of petitions.

2. The issue which falls for consideration of this Court in the present proceedings pertains to the action of the department in rejecting the petitioner’s refund application, by an order in original. The said order was assailed by the petitioner by filing appeals, however, the appeals came to be rejected by the impugned order dated 31 July, 2023, on the ground that they were barred by limitation in view of the provisions of Section 107(1) of the CGST Act, 2017 .

3. The facts relevant for the adjudication of these petitions need to be set out: The petitioner is a company engaged in the business of providing bulk carrier, container carrier and shipping services at various ports in India. The petitioner contends that in December 2017, it supplied services to SEZ unit, which were zero-rated supplies, on payment of IGST. Consequently, the petitioner contends that it became entitled to the refund of tax so paid. Accordingly, on 28 August, 2018, the petitioner filed refund application in respect of such IGST paid for December, 2017, in Writ Petition (L) No. 36200 of 2023, amounting to Rs.2,70,040/-. The petitioner contends that the said refund application was required to be considered and decided in accordance with the procedure as prescribed under Rule 92 of the CGST Rules, 2017 , which provides for ‘issuance of an order sanctioning the refund’. More importantly, it is the petitioner’s case that, read with the proviso thereto, the said provision mandates that, in the event the refund, or any part thereof, is found to be inadmissible, the petitioner must be informed by issuance of a deficiency memo and be afforded an opportunity of a hearing.

4. It is the petitioner’s case that overlooking such mandate of Rule 92 , respondent no. 4, without issuing any deficiency memo or show cause notice, passed an ex-parte order dated 13 September, 2019 rejecting the refund application. Such order was received by the petitioner on 25 September, 2019. The petitioner contends that the said order was not uploaded on the GST portal., however, it is not in dispute that the order was physically served on the petitioner and duly received. In these circumstances, the petitioner states that on 31 January, 2020, i.e., approximately three months after the passing of order of rejection of the refund applications, the petitioner sought to rectify the refund application and accordingly submitted the requisite documents. It also transpired that on 12 February, 2020, the petitioner filed a fresh refund application. Significantly, on 27 February, 2020, the designated officer issued a deficiency memo on the fresh refund application as filed by the petitioner, as also called upon the petitioner to furnish a copy of the appeal order in its favour. The said deficiency memo is required to be noted, which reads thus:

“FORM-GST-RFD-03

(See rule 90(3)

Deficiency Memo

Reference no.: ZY2702200348857 Date: 27/02/2020 6:01pm

To

27AADCK3559Q1ZU

K LINE INDIA PRIVATE LIMITED

UNIT NO. 1001, C WING, 10TH FLOOR

MARATHON FUTUREX,

MAFATLAL MILLS COMPOUND

N M JOSHI MARG, LOWER PAREL,

Mumbai City, 27, 400013

Subject : Refund Application Reference NO. (ARN) AA