M/S Pandey Drug House vs. Assistant Commissioner Of State Tax

Held

The Court held that no case for interference was made out. Firstly, it was determined that the petitioner's case was not one of deficiencies or defects in the refund application, thus the requirement to afford an opportunity under Rule 90(3) of the CGST Rules did not arise. Secondly, the Court noted that a show cause notice had been issued to the petitioner, to which they had responded, satisfying the requirement of compliance with the rules of natural justice concerning Section 54 of the CGST Act. The revenue's clear stand was that this was not a case of application defects but of tax evasion, as detected in an inquiry, for which a separate notice had been issued. Consequently, the Court concluded that the matter involved disputed questions of fact, which are not ordinarily adjudicated in writ jurisdiction under Article 226 of the Constitution. The Court declined interference and relegated the petitioner to avail the statutory remedy of appeal under Section 107 of the GST Act, granting them liberty to file the appeal within 30 days from the date of the order, which would be entertained and decided on merits without being dismissed on limitation alone. The Court explicitly stated that no comment on the merits of the claim was made.

Facts

The petitioner, M/s Pandey Drug House, filed a writ petition before the Madhya Pradesh High Court challenging an order dated 29.03.2023 that rejected their claim for refund under Section 54 of the CGST Act, 2017. The rejection was based on the grounds that the petitioner was not entitled to the refund and that the case appeared to be one of tax evasion. The petitioner argued that the refund was rejected without affording them a reasonable opportunity of being heard, violating principles of natural justice, and that they were not informed of any deficiencies in their refund application as required by Rule 90 of the GST Rules. The revenue contended that the case was not about deficiencies but about the petitioner not being entitled to the refund, and that the statutory remedy of appeal under Section 107 of the GST Act was available but not availed.

Key Issues

1. Whether the rejection of the refund claim by the Assistant Commissioner of State Tax, Circle-04, Jabalpur, without affording the petitioner a reasonable opportunity of being heard, violates the principles of natural justice as enshrined in the proviso to Rule 92 of the GST Rules? 2. Whether the Proper Officer failed to inform the petitioner of deficiencies in the refund application as mandated by Rule 90 of the CGST Rules, thereby precluding the petitioner from rectifying them? Petitioner's Arguments: The petitioner contended that the rejection of their refund claim violated principles of natural justice due to the lack of a reasonable opportunity to be heard, as stipulated in the proviso to Rule 92 of the GST Rules. They further argued that under Rule 90 of the CGST Rules, the Proper Officer was obligated to inform them of any deficiencies in their refund application to allow for rectification, an opportunity that was not provided. Revenue's Arguments: The revenue countered that the issue was not one of deficiencies in the refund application but rather that the petitioner was fundamentally not entitled to the refund. They also raised a preliminary objection regarding the petitioner's failure to avail the statutory remedy of appeal under Section 107 of the GST Act.