Sahibabad Printers vs. Additional Commissioner CGST(Appeals) And 2 Others

Held

The Court held that in quasi-judicial proceedings, especially those involving financial adjudication, the proposed reasons for rejection must be clearly communicated to the assessee to enable them to provide a conclusive and reasonable reply. The show cause notice in this case was found to be deficient, falling short of the principles of natural justice, as it did not provide specific reasons for the proposed rejection. Consequently, the adjudication of the refund claim was vitiated by a violation of natural justice. The Court also noted that the appellate authority's finding that no documents were produced was incorrect, as the refund application itself contained supporting documents. Therefore, both the order rejecting the refund application dated 07.04.2020 and the appellate order dated 14.09.2020 were set aside. The Court directed the Assistant Commissioner to pass a fresh order on the petitioner's refund application after providing all requisite documents, grounds for rejection, and an adequate opportunity for a hearing. The decision on the refund application is to be made expeditiously, preferably within three months.

Facts

The petitioner, Sahibabad Printers, filed a writ petition challenging two orders: one dated 14.09.2020 by the Additional Commissioner, CGST (Appeals), rejecting their appeal, and another dated 07.04.2020 by the Assistant Commissioner, CGST, rejecting their refund application. The petitioner, a registered supplier, claimed a refund of Rs. 13,68,758/- under the inverted duty structure for job work on cloth and other suppliers during April 2018 to July 2018. They filed a refund application on 24.02.2020. A show cause notice dated 19.03.2020 was issued, citing 'Other' as the reason for rejection and noting a discrepancy in turnover figures. The petitioner claims they could not reply due to the lockdown. The refund application was rejected on 07.04.2020 without a hearing or assigned reasons. The petitioner received the rejection order on 19.06.2020 and appealed, which was dismissed on 14.09.2020 for non-submission of a reply to the show cause notice.

Key Issues

1. Whether the show cause notice dated 19.03.2020, issued by the Assistant Commissioner, CGST, was vitiated by unfairness and bias, thereby violating principles of natural justice, as argued by the petitioner? 2. Whether the appellate order dated 14.09.2020, passed by the Additional Commissioner, CGST (Appeals), erred in holding that the petitioner did not submit any documents to justify their refund claim, as argued by the petitioner? Petitioner's arguments: The petitioner contended that the show cause notice was vague and did not provide specific reasons for rejection, making it impossible to furnish a meaningful reply. They relied on the Supreme Court judgment in "ORYX Fisheries Private Limited vs. Union of India (UOI) and Ors" to argue that a show cause notice must clearly state the charges. They also argued that all supporting documents were filed with the refund application and that the appellate authority wrongly stated no documents were produced. Respondent's arguments: The respondent argued that the department was justified in rejecting the refund claim due to the petitioner's failure to file refund documents and that the appellate order was correct.