A Division Bench of the Rajasthan High Court recently set aside the orders passed against the assessee, both in adjudication and appellate stages and observed that the violation of natural justice in adjudication stage cannot be cured by substantial compliance of natural justice in appellate stage.
The petitioner had claimed refund of accumulated input tax credit on account of export of goods under a letter of undertaking in terms of the provisions of Section 54(3) of the Central Goods & Service Tax Act before the Assistant Commissioner, Central Goods and Services Tax (CGST) who first sanctioned the refund claim in part but later passed a rejection order summarily.
The petitioner counsels, Anjay Kothari, Mukesh Gurjar and Amit Sharma placed reliance on the Section 54(3) of the CGST Act and Rule 92 of the CGST Rules and contended that there was substantial violation of the provisions which existed to provide protection of the right to be heard to the assessees, an important notion of natural justice.
Elaborating the arguments, the representatives of the assessee submitted that, provisions of Rule 92(3) envisage issuance of notice in Form GST RFD-08 requiring the applicant to furnish a reply in Form GST RFD-09 and after considering the reply, order can be made in Form GST RFD-06 and that no application for refund shall be rejected without giving the applicant an opportunity of being heard. It was then contended that the said provisions were violated by the authority.
The appellate authority, however, determined that the adjudicating authority did not follow natural justice, but since natural justice was upheld during the appellate proceedings, the authority held that, “natural justice has been duly followed during the appeal proceedings and the case is heard on the basis of merits” and rejected the appeal.
The department representative, Kuldeep Vaishnav, vehemently opposing the arguments of the petitioner, submitted as “the appellate authority has considered all the issues sought to be raised by the petitioner, merely because the original authority did not provide opportunity of hearing to the petitioner, cannot be a reason for questioning the validity of the orders on the said count alone and therefore, the petition deserves dismissal.”
The Division Bench of Justices Ashok Kumar Jain and Arun Bhansali, observed that, “It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them.”
The matter was thus remanded back to the adjudicating authority and the rejection of the refund claim of accumulated input tax credit was set aside.
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