Sweta Distributors Private Limited vs. The Union Of INDIA Thr. Revenue Secretary And Ors

Held

The Court held that there was an apparent violation of the principles of natural justice in the passing of both the Order in Original and the Order in Appeal. The Order in Original dated December 30, 2021, was passed without giving the petitioner adequate opportunity to file documents that were uploaded on January 17, 2022, and it did not contain any reasons for rejection. The Order in Appeal relied on Rule 89 of the CGST Rules, which was not part of the show cause notice nor presented to the petitioner, and the Appellate Authority did not call for details to support its rejection. Therefore, in the interest of justice, both orders were quashed and set aside. The refund application was restored to the file of the original authority for fresh adjudication, with directions for a hearing, a speaking order within four months, and all contentions of the parties being expressly kept open. The ratio decidendi is that statutory authorities must adhere to principles of natural justice, providing adequate opportunity to present evidence and giving reasoned orders.

Facts

The petitioner, Sweta Distributors Pvt. Ltd., filed a writ petition challenging an Order-In-Original (O-I-O) dated December 30, 2021, which rejected its refund application, and an Order-In-Appeal (O-I-A) dated May 4, 2022, which dismissed its appeal. The petitioner applied for a refund of Rs. 10,49,562/- on November 1, 2021, for tax paid on export of services for August 2021. The respondents issued a notice on December 20, 2021, proposing rejection due to a lack of nexus between input and output supply, with a reply due on December 24, 2021. The petitioner replied on December 23, 2021, arguing no nexus is required, only use in business. The O-I-O was uploaded on December 30, 2021, without reasons, and the petitioner noticed this in January 2022 after uploading supporting documents like foreign remittance proof. The appeal was rejected on May 4, 2022, citing Rule 89 of the CGST Rules for non-provision of export invoices.

Key Issues

1. Whether the Order in Original dated December 30, 2021, rejecting the refund application was passed in violation of the principles of natural justice, specifically concerning the opportunity to file documents and the absence of reasons, under Article 226 of the Constitution of India. 2. Whether the Order in Appeal dated May 4, 2022, was passed in violation of the principles of natural justice, by relying on Rule 89 of the CGST Rules without it being part of the show cause notice or being put forth to the petitioner, and without calling for necessary details. Petitioner's arguments: The O-I-O was passed in haste before the petitioner could submit all documents, and it lacked reasons. The Appellate Authority rejected the appeal based on Rule 89 of the CGST Rules, which was not previously communicated, and without seeking further explanation. Therefore, the impugned orders are bad in law and require remand. Respondents' arguments: The petitioner is required to prove a nexus between input tax credit on goods and refund claimed on export of services. However, the respondents did not dispute that the orders were passed without considering these issues and stated they would not object to a remand.