Refund application cannot be rejected without providing opportunity of personal hearing to the assessee

Last updated: 10 February 2023

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Quick Summary

The Madras High Court has quashed a GST refund rejection order because the tax authorities failed to provide the assessee with a personal hearing. The court found this to be a violation of natural justice principles. The case involved Lenovo India Private Limited, whose refund application for over £8.5 million was rejected without proper consideration of their request for a hearing. The High Court has now ordered the authorities to reconsider the refund application, ensuring a personal hearing is given and all objections are addressed.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in M/s. Lenovo India Private Limited Vs Assistant Commissioner of GST & Central Excise in [W.P.No.1863 of 2023 and W.M.P.No.1965 of 2023 dated February 01, 2023] quashed the Order passed by the Revenue Department rejecting the refund application of the assessee, on the grounds that, no opportunity of personal hearing was provided, which is against the principles of natural justice. Further, directed the Revenue Department to pass an order after adhering to the principles of natural justice, considering on merits and in accordance with law within a period of 12 weeks.

Citation :
W.P.No.1863 of 2023 and W.M.P.No.1965 of 2023 dated February 01, 2023

The Hon'ble Madras High Court in M/s. Lenovo India Private Limited Vs Assistant Commissioner of GST & Central Excise in[W.P.No.1863 of 2023 and W.M.P.No.1965 of 2023 dated February 01, 2023] quashed the Order passed by the Revenue Department rejecting the refund application of the assessee, on the grounds that, no opportunity of personal hearing was provided, which is against the principles of natural justice. Further, directed the Revenue Department to pass an order after adhering to the principles of natural justice, considering on merits and in accordance with law within a period of 12 weeks.

Facts

M/s. Lenovo India Private Limited, ("the Petitioner") has challenged the order dated December 13, 2022 ("the Impugned Order") rejecting their application seeking refund claim for INR 8,52,78,067/- which being Integrated Goods and Services Tax ("IGST") paid on supply of goods to SEZ Units on the ground of violation of principles of natural justice.

A Show Cause Notice dated November 12, 2022 ("the Impugned SCN") was issued to the Petitioner by the Revenue Department ("the Respondent") proposing to reject the refund application of the Petitioner and calling upon the Petitioner to submit a reply within a period of 15 days. Further, the Petitioner was called upon to appear on November 28, 2022 through physical/virtual hearing. The Petitioner submitted a reply dated December 02, 2022 requesting for a personal hearing, which was not afforded to the Petitioner and consequently, the Impugned Order was passed.

Being aggrieved, the writ petition has been filed.

Issue

Whether the principles of natural justice have been violated while rejecting the refund claim?

Held

The Hon'ble Madras High Court in W.P.No.1863 of 2023 and W.M.P.No.1965 of 2023 held as under:

Stated that, that the Respondent should not have scheduled a physical/virtual hearing within seven days from the date of issue of the Impugned SCN as the Petitioner was given 15 days to submit a reply to the Impugned SCN.
Observed that, no personal hearing was afforded to the Petitioner and the objections raised by it were also not considered.
Further observed that, principles of natural justice have been violated by the Respondent before passing of the Impugned Order by not providing the opportunity of hearing to the Petitioner.
Quashed the Impugned Order.
Remanded the matter back to the Respondent for fresh consideration on merits and in accordance with law.
Directed the Respondent to pass an order within a period of 12 weeks.

FAQ :

The Madras High Court ruled that GST refund applications cannot be rejected without first providing the assessee with an opportunity for a personal hearing.

The refund application was rejected because the tax authorities did not provide the assessee, Lenovo India Private Limited, with a personal hearing, which the court deemed a violation of natural justice.

The principle of natural justice, in this context, means that individuals affected by a decision must be given a fair opportunity to be heard before a decision is made.

The refund claim in question was for INR 8,52,78,067 (approximately £8.5 million), which was IGST paid on the supply of goods to SEZ Units.

The court ordered the Revenue Department to reconsider the refund application on its merits, provide a personal hearing to the assessee, and pass a fresh order in accordance with the law within 12 weeks.