Cotton Exporter’s 39 Partial ITC Refund Denials Sent Back for Fresh Decisions After GST Tribunal Finds No Mandatory Show-Cause Notices Were Issued

M/s. Lavino Kapur Cottons Pvt. Ltd., a 100% EOU exporting absorbent cotton, claimed refunds of accumulated ITC for tax periods from June 2019 to September 2022.

In the lead case for August 2020, the Adjudicating Authority partially rejected the refund on the stated ground of “Mismatch of ITC” without issuing a notice in Form GST RFD-08 or providing a hearing.

The First Appellate Authority acknowledged the procedural omission but upheld the rejection, relying on the appellant’s failure to produce certain documents during appellate hearings. The appellant filed 39 appeals before the Tribunal.

Whether partial rejection of a refund claim without issuing Form GST RFD-08 and providing an opportunity of hearing violates Rule 92(3) of the CGST/MGST Rules and the principles of natural justice

Whether a hearing at the appellate stage can cure the failure to provide the statutorily required notice and hearing at the adjudication stage

Whether the matters should be remanded for fresh proceedings in accordance with law

Rule 92(3) of the CGST/MGST Rules, 2017 requires the proper officer, before rejecting any part of a refund claim, to issue notice in Form GST RFD-08, invite a reply in Form GST RFD-09, consider that reply, and provide an opportunity of hearing; the proviso bars rejection without such an opportunity.

The Tribunal treated these requirements as mandatory and held that a post-decisional appellate hearing cannot substitute for the statutory pre-decisional notice and hearing.

It also referred to Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan for the principles that quasi-judicial authorities must act fairly, follow prescribed procedure, and give reasoned decisions.

The Adjudicating Authority admittedly issued the refund rejection order without Form GST RFD-08 or a hearing, contrary to Rule 92(3).

The Tribunal rejected the Revenue’s argument that appellate hearings cured the omission: those hearings occurred after the adverse order and did not provide the appellant the required opportunity to respond to the grounds before rejection.

The procedural defect undermined the original order, and the First Appellate Authority should have remanded the matter rather than deciding the refund’s merits despite recognising the violation.

The Tribunal therefore did not determine the substantive ITC-mismatch or COVID-19-relief issues and left them open for fresh consideration.

It set aside the impugned appellate orders and the corresponding original orders to the extent they rejected the refund claims, and remanded all 39 matters for de novo processing.

On remand, the Adjudicating Authority was directed to issue a detailed Form GST RFD-08 if any part of a claim was found inadmissible, allow a reply and personal hearing, and pass a reasoned order in Form GST RFD-06.