Refund Rejection Without RFD-08 SCN Is Void: GSTAT Thane Remands 39 Appeals

Case: Vikram Inderjit Kapur (Lavino Kapur Cottons Pvt. Ltd.) v. Deputy Commissioner of State Tax, Tarapur

Forum: GSTAT, State Bench Thane | APL/12 to 50/THN/2026 | Date: 22.10.2026

Case issue

• Is a refund rejection order valid if it is issued without following the mandatory procedure under Rule 92(3) of the CGST Rules?
• Can an opportunity of being heard given after the order compensate for the pre-decisional hearing the taxpayer should have received?

Sections/provisions covered under the case law

• Rule 92(3) of the CGST Rules
• Section 16(3)(a) of the IGST Act
• Rule 36(4) of the CGST Rules (relevant to the ITC reconciliation)

Brief facts of the case

• The appellant is a 100% export-oriented unit registered under the MGST Act. It manufactures cotton and exports the finished goods outside India without payment of tax, thereby claiming refund of accumulated unutilised input tax credit. 39 appeals covering June 2019 to September 2022 were heard together, with August 2020 as the lead case.
• The appellant applied for a refund for August 2020 amounting to Rs. 63,17,232/- (CGST Rs. 23,25,889/-, SGST Rs. 23,25,889/- and IGST Rs. 16,65,454/-).
• The proper officer processed the application and issued a refund order partially rejecting Rs. 18,09,402/- on account of "mismatch of ITC". Before issuing the order, the officer neither issued a show cause notice nor gave the appellant an opportunity of being heard, as required under Rule 92(3) of the CGST Rules. The order also did not explain the reason for the mismatch.
• Aggrieved, the appellant filed an appeal. It submitted an ITC reconciliation based on Notification No. 30/2020-Central Tax and Circular No. 142/12/2020-GST, which required Rule 36(4) to be applied cumulatively for February to August 2020, with the adjustment made in the GSTR-3B for September 2020. The appellant showed that the ITC claimed in GSTR-3B for the period was lower than the ITC in GSTR-2A, so no mismatch arose.
• The First Appellate Authority admitted that the mandatory procedure had not been followed. Despite this, it ruled in favour of the department on the ground that the appellant did not produce certain documents at the appellate hearings. It confirmed the rejection without considering the reconciliation submitted.
• Aggrieved by the order in appeal, the appellant approached the Tribunal.
• The department's defence: it agreed that RFD-08 was not issued, but argued that the appellant had been given multiple opportunities of being heard during the appellate hearings. It also argued that the appellant had not shown any specific prejudice from the non-issuance of RFD-08, as it knew the disputed refund amount and the reasons for rejection and had contested them through its statutory appeal.
• The Tribunal considered the facts and both sides' contentions and remanded the matter to the adjudicating officer on the following grounds:
• Rule 92(3) is mandatory. An officer cannot reject a refund, wholly or partly, without issuing RFD-08 and giving a hearing.
• The right to a show cause notice and a hearing before an adverse civil consequence (such as rejection of a substantial refund) is a fundamental statutory right, rooted in the constitutional principle of audi alteram partem. A post-decisional hearing at the appellate stage cannot substitute a pre-decisional statutory notice.
• The original order, passed in complete defiance of a mandatory statutory procedure, is void ab initio, and the order in appeal built on it cannot stand. Having noted the blatant violation of Rule 92(3), the First Appellate Authority ought to have remanded the matter to the Adjudicating Authority instead of asking for documents and deciding on merits.
• The Tribunal directed the adjudicating officer to process the applications afresh. If any part of the refund is found inadmissible, the officer must follow Rule 92(3). The appellant must cooperate fully with the remand proceedings and produce all requisite evidence before the Adjudicating Authority.
• The Tribunal did not decide the ITC mismatch or the effect of the COVID relief. These remain open before the Adjudicating Authority.

Case Reference

• Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan
• Notification No. 30/2020-Central Tax
• Circular No. 142/12/2020-GST

My take

• The ruling reinforces a basic point: procedure under Rule 92(3) is a condition of the officer's power to reject, not a formality. The Revenue's "no prejudice" argument fails where the taxpayer was never told what the mismatch was. A vague "mismatch of ITC" order should not survive.
• For the taxpayer, this is a procedural win, not a win on merits. The Rs. 18 lakh question is back before the officer, and the reconciliation will decide the outcome. Exporters should treat the remand as a second chance to present a clean, invoice-wise reconciliation.

Key Takeaways

• On receiving a refund rejection order, ensure the proper procedure was followed, i.e. issuance of a show cause notice and an opportunity of being heard. If not, raise it immediately.
• Keep a proper reconciliation of all invoices and ITC as per books with GSTR-3B and GSTR-2A on a monthly basis.

Disclaimer: This is a summary for information only and not legal advice. Please read the original order before relying on it.