An Order cannot be passed without giving appropriate reasons

The Delhi High Court has ruled that appellate authorities must provide clear and specific reasons when deciding on GST refund applications. In this case, the court found an order unsustainable because it failed to explain on what basis the applicant's eligibility for an Input Tax Credit (ITC) refund was denied. The court emphasised that orders must consider the factual details and arguments presented by the applicant, rather than being merely 'cryptic'. The matter was sent back for a fresh decision with a proper hearing.

The Hon'ble Delhi High Court in the case of GS Exim International LLP Through its designated Partner Bhakti Pada Ghosh v. Commissioner, Central Excise/ (GST) Appeal-I, Through Join Commissioner and Anr. [Writ Petition (Civil) 3300 of 2022 dated February 08, 2024] held that it was not apparent from the Order passed by the Appellate Authority as to why or on what basis the Petitioner does not fulfil the eligibility conditions of claiming the refund of the Input Tax Credit ("ITC"), the reasoning was not emanating, the Order was cryptic and there was no specific consideration of the factual matrix or the contentions of the Petitioner. Hence, the Orderpassed by the Appellate Authority was unsustainable.

Facts

GS Exim International LLP("the Petitioner") filed an application seeking GST refund. The Proper Officer issued a Show Cause Notice dated August 04, 2020 proposing to reject the GST refund. The Petitioner replied on August 12, 2020 and submitted it on the GST Portal. The Petitioner also produced a copy of the reply and submitted the same physically to the Adjudicating Authority at the time of hearing of the Impugned SCN. Thereafter, the Adjudicating Authority rejected the application by an Order dated August 21, which led to the Petitioner filing an appeal before the Appellate Authority ("the Respondent").

The Appellate Authority passed an Order-in-Appeal dated September 09, 2021 ("the Impugned Order") and held that the Order passed by the Adjudicating Authority is cryptic and does not deal with any of the submissions made by the Petitioner. 

Hence, aggrieved by the Impugned Order, the present writ petition was filed by the Petitioner.

Issue

Whether an Appellate Authority can pass an Order without mentioning the appropriate reasons or findings?

Held

The Hon'ble Delhi High Court in Writ Petition (Civil) 3300 of 2022 held as under:

• Observed that, there is no consideration of the submissions in the paragraphs and the Impugned Order merely extracts the Board Circular and holds that the eligibility conditions are not complied with.
• Noted that, it is not apparent from the Impugned Order as to why or on what basis the Petitioner does not fulfil the eligibility conditions for claiming the refund of ITC. Therefore, the Impugned Order is cryptic, and the reasoning is not emanating. There is no specific consideration of the factual matrix or the contentions of the Petitioner in the Impugned Order. Hence, the Impugned Order was set aside.
• Held that, the Respondent would decide the appeal afresh and pass a speaking order after giving an opportunity of personal hearing to the Petitioner. Therefore, the Impugned Order was set aside, and the writ petition was disposed of.

Section Analysis

Section 54 of  the Central Goods and Services Act, 2017 ("the CGST Act")talks about "Refund of Tax". According to Section 54(3) of the CGST Act, a registered person may claim the refund of unutilised ITC from the relevant date of any tax period, provided that no refund of unutilisedITC shall be allowed in cases other thanzero-rated supplies made without payment of tax, where the ITC has been accumulated on account of inverted duty structure (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council, where the goods exported out of India are subjected to export duty and if the supplier of goods or services or both avail drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.