M/S. K. A. Wholesale Traders PVT. LTD. vs. Assisstant Commissioner (St)

Held

The Court held that the practice of issuing multiple deficiency memos is not supported by any enabling provision and is detrimental to the timely conclusion of refund proceedings. The Court noted that a subsequent notice can only be issued if a deficiency is noticed subsequently. The issuance of six deficiency memos was deprecated as it consumes time and prevents the conclusion of refund proceedings within the stipulated time, indicating a deficiency in procedure. The Court directed that if the respondents are not satisfied with the petitioners' replies regarding the curing of deficiencies, they must issue a notice to the petitioners within 15 days of receiving the order's copy. The petitioners' response should be obtained within 7 days thereafter, and the respondents must take a final decision on the refund within 15 days of receiving that response. The Court explicitly stated that it was not expressing any views on the merits of the matter.

Facts

M/s. K.A. Wholesale Traders Pvt Ltd and its director, Mr. Allapichai (petitioners), sought a refund of Rs. 70,60,190, which is part of a larger claim of Rs. 98,17,925, through an application filed on October 30, 2023. The Assistant Commissioner (ST), Jubilee Hills Circle (1st respondent), issued six successive deficiency memos instead of a show-cause notice and a speaking order. The petitioners responded to each deficiency memo. The respondents have not yet made a final decision on the refund claim. The petitioners contend that the issuance of multiple deficiency memos is contrary to law and statutory provisions.

Key Issues

1. Whether the action of the 1st respondent in issuing multiple deficiency memos in succession, instead of a show-cause notice and a speaking order, is contrary to Section 54 read with Rule 92(3) of the CGST and TGST Acts and Rules, 2017? Petitioner's arguments: The petitioners argued that the practice of issuing multiple deficiency memos is unknown to law and unsupported by any statutory provision. They relied on Circular No. 37/11/2018-GST dated March 15, 2018, which states that once an application is submitted afresh after a deficiency memo, the proper officer should not serve another deficiency memo for the same period unless unrectified deficiencies or new substantive deficiencies are found. They prayed for a direction to the 1st respondent to comply with Rule 92(3) and pass a speaking order. Respondents' arguments: The learned Special Government Pleader for respondents 1 and 2 submitted that multiple deficiency memos were issued because multiple deficiencies were noticed. He agreed that if the respondents were not satisfied, they would issue a show-cause notice and, after considering the petitioners' response, take a decision on the refund. The respondent for the Union of India did not record any specific arguments.