Prime Export Corporation vs. Commissioner Of GST, Delhi

Facts

The petitioner, Prime Export Corporation, filed a writ petition challenging an order dated 08.04.2022, which rejected its refund claim of ₹47,07,033/-. The sole reason provided for the rejection was "Forged ITC Claim". It was conceded by the respondent that no show cause notice was issued to the petitioner prior to the passing of the impugned order. The respondent's counsel submitted that the impugned order could be set aside, allowing the respondent to issue a fresh show cause notice and consider the refund application after providing the petitioner an opportunity to be heard.

Held

The Court held that the impugned order dated 08.04.2022, rejecting the petitioner's refund claim of ₹47,07,033/-, was unsustainable as it was passed without issuing a show cause notice to the petitioner and providing an opportunity to be heard. The Court acknowledged the respondent's concession that the procedure was not followed. Consequently, the impugned order was set aside. The Court directed the respondent to issue a fresh show cause notice, in Form RFD 08, within three weeks from the date of the order, if they intended to reject the refund claim. The respondent was also directed to process the refund claim within four weeks thereafter and to pass a speaking order after affording the petitioner due opportunity to be heard. The ratio decidendi is that rejection of a refund claim without adhering to principles of natural justice, specifically by not issuing a show cause notice, is illegal and liable to be quashed.

Key Issues

1. Whether the rejection of the petitioner's refund claim without issuing a show cause notice and providing an opportunity to be heard is violative of principles of natural justice, particularly in light of Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) and relevant rules? The petitioner argued that the impugned order, rejecting its refund claim of ₹47,07,033/-, was passed without adhering to the mandatory procedure of issuing a show cause notice and affording an opportunity of being heard, thereby violating principles of natural justice. The petitioner contended that such an arbitrary rejection is unsustainable. The respondent conceded that no show cause notice was issued and submitted that the impugned order could be set aside to allow for a fresh show cause notice and proper adjudication.