GST Tribunal Remands 39 Lavino Kapur Cottons Export-Refund Cases After Partial Claims Were Rejected For ITC Mismatch Without Show-Cause Notices

M/s. Lavino Kapur Cottons Pvt. Ltd., a 100% Export Oriented Unit, claimed refunds of accumulated input tax credit for multiple tax periods.

The Adjudicating Authority partially rejected the claims on the ground of “Mismatch of ITC” without issuing a notice in Form GST RFD-08 or providing a hearing.

The First Appellate Authority acknowledged that Rule 92(3) had not been followed but dismissed the appeals, relying on the appellant’s failure to produce requested documents during appellate hearings.

The Tribunal considered the resulting batch of 39 appeals together, using the August 2020 refund claim as the lead case.

1. Whether a partial rejection of a refund claim without issuing Form GST RFD-08 and providing an opportunity to be heard violates Rule 92(3) and natural justice

2. Whether a hearing at the appellate stage can cure the failure to provide the prescribed notice and hearing at the adjudication stage

3. Whether the matters should be remanded to the Adjudicating Authority for fresh proceedings

Rule 92(3) of the CGST/MGST Rules, 2017 requires the proper officer, before rejecting any part of a refund claim, to issue a notice in Form GST RFD-08, allow the applicant to reply in Form GST RFD-09, consider that reply, and provide an opportunity of hearing; the Tribunal treated these requirements as mandatory.

The principles of natural justice, including audi alteram partem, require a meaningful opportunity to respond before an adverse decision is made, and a post-decisional appellate hearing does not substitute for a statutorily required pre-decisional notice.

The Tribunal also referred to Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan for the requirement that quasi-judicial authorities act fairly, follow prescribed procedure, and issue reasoned orders.

The Tribunal found it undisputed that the Adjudicating Authority issued the refund sanction/rejection orders without Form GST RFD-08 or a hearing.

It rejected the Revenue’s argument that appellate hearings cured that omission: without the prescribed notice, the appellant had not been given the required opportunity to know and answer the specific grounds for the alleged ITC mismatch before rejection.

Because the initial orders were made in breach of the mandatory procedure, the Tribunal held that the First Appellate Authority should have remanded the claims rather than deciding them against the appellant on the basis of documents sought at the appellate stage.

It therefore did not determine the substantive merits of the ITC mismatch or the claimed COVID-19-related relief.

If any part of a claim is proposed to be rejected, the Adjudicating Authority must issue a detailed Form GST RFD-08, allow a reply and personal hearing, and pass a speaking order in Form GST RFD-06; all issues were left open.