Deficiencies in a GST refund application should be communicated through deficiency memo

The Hon'ble Bombay High Court, in the case of Raiden Infotech India (P.) Ltd. v. State of Maharashtra [Writ Petition (L) No. 22309 of 2024 dated December 14, 2024] restored the Refund Application where the deficiency memo in Form GST RFD-03 was not issued to the Assessee, and the order rejecting the refund application was to be set aside. However, since the Assessee failed to avail the opportunity granted to raise contentions in response to the Show Cause Notice ("SCN"), the Assessee had to pay the cost.

Facts:

M/s Raiden Infotech India (P.) Ltd. ("the Petitioner") filed a writ petition challenging the Order dated April 30, 2024 ("the Impugned Order") passed by the Revenue Department (the "Respondent"), which rejected the Petitioner's Refund Application.

The Petitioner argued that a deficiency memo in Form GST RFD-03 is required to be issued, and the Assessee can then exercise the option of withdrawing such application and filing a fresh application after clearing the deficiencies.

Hence, the Petitioner contended that since the above was not done in the present case, the Impugned Order must be set aside.

The Petitioner contended that though this order is appealable, it is a case of breach of natural justice. Even if the violation of natural justice is not considered for a moment, a case of remand is made out. The appeal was rejected due to some alleged procedural deficiencies. However, the Respondent did not issue any Deficiency Memo in Form GST RFD-03, thereby depriving the Petitioner of the opportunity to refile the appeal.

The Respondent contended that the SCN was issued to the Petitioner, requiring the Petitioner to show cause as to why the refund application should not be rejected on the grounds of deficiencies. However, despite such a notice, no cause was shown, and therefore, the Impugned Order was passed.

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

Issue:

Whether deficiencies in a GST refund application should be communicated through a deficiency memo?

Held:

The Hon'ble Bombay High Court in Writ Petition (L) No. 22309 of 2024 held as under:

• Relied on, the Bombay High Court case of M/s Knowledge Capital Services Private Limited v. Union of India and Ors. (supra) where it was noted that any deficiencies in a refund application must be communicated to an applicant through Form GST RFD-03, allowing the applicant to take remedial measures in accordance with the law. However, no such deficiency memo or notice in terms of Form GST RFD-03 was issued to the Petitioner in the present case.
• Noted that, though prima facie Form GST RFD-03 may not have been issued to the Petitioner, even the Petitioner failed to avail of the opportunity granted to the Petitioner to raise such contentions in response to the SCN. In this case, the Petitioner must accept the blame for not responding to the SCN within the time granted and raising the contentions which have now been raised after the Impugned Order was passed.
• Held that, the interest of justice in such a situation would require the Petitioner to pay costs of Rs.2,00,000/- within 4 weeks from the date of the present judgment. Given the peculiar circumstances and the fact that no Form GST RFD-03 was issued to the Petitioner, and the Impugned Order was set aside, the Petitioner's refund application made in Form GST RFD- 01 was restored to the file again

Our Comments:

Rule 90(3) of the Central Goods and Service Tax Rules, 2017 ("the CGST Rules") confer that where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in Form GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies. The proviso, however, confers that the time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORM GST RFD-03 by the proper officer, shall be excluded from the period of two years as specified under sub-section (1) of Section 54, in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies.

In the case before Hon'ble Delhi High Court in the case of Jian International v. Commissioner of Delhi Goods and Services Tax [W.P. (C) 4205/2020 dated July 22, 2020] held that where refund application has not been processed and neither any acknowledgment in Form GST RFD-02 has been issued nor any deficiency memo has been issued in RFD-03 within time line of 15 days, the refund application would be presumed to be complete in all respects in accordance with sub- rule (2), (3) & (4) of rule 89 of the CGST Rules. Allowing the department to issue a deficiency memo after 15 days would enable them to process the refund application beyond the statutory timelines as provided under Rule 90 of the CGST Rules. The Department has lost the right to point out any deficiency beyond 15 days in the petitioner's refund application at this belated stage.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED