Passing an Order Without Providing Adequate Reasons is Impermissible
The Delhi High Court in the matter of GS Exim International LLP, represented by its designated Partner Bhakti Pada Ghosh, versus Commissioner, Central Excise/GST Appeal-I, represented by Joint Commissioner and Another [Writ Petition (Civil) 3300 of 2022 dated February 08, 2024], ruled that the Order issued by the Appellate Authority lacked clarity on why or on what grounds the Petitioner was deemed ineligible for claiming Input Tax Credit (ITC) refund. The Court found the Order to be ambiguous, devoid of specific reasoning, and lacking consideration of the Petitioner’s contentions, making it unsustainable.
Facts:
GS Exim International LLP, hereinafter referred to as “the Petitioner,” submitted a GST refund application. The Proper Officer issued a Show Cause Notice dated August 04, 2020, suggesting the rejection of the GST refund. The Petitioner responded on August 12, 2020, submitting the reply through the GST Portal and physically providing a copy to the Adjudicating Authority during the hearing of the aforementioned Show Cause Notice. Subsequently, the Adjudicating Authority declined the application through an Order dated August 21. This led the Petitioner to file an appeal before the Appellate Authority, denoted as “the Respondent.”
The Appellate Authority issued an Order-in-Appeal dated September 09, 2021, commonly referred to as “the Impugned Order,” wherein it remarked that the Adjudicating Authority’s decision lacked clarity and failed to address any of the contentions raised by the Petitioner.
Consequently, dissatisfied with the Impugned Order, the Petitioner initiated the present writ petition.
Issue:
Can the Appellate Authority issue an Order without specifying adequate reasons or conclusions?
Held:
The Delhi High Court in the matter of Writ Petition (Civil) 3300 of 2022 ruled as follows:
1. The court observed that the Impugned Order lacks consideration of the submissions presented in the paragraphs, relying solely on the Board Circular and asserting non-compliance with eligibility conditions.
2. It was noted that the Impugned Order fails to clarify why or on what grounds the Petitioner falls short of meeting eligibility conditions for ITC refund. The order lacks transparency in reasoning and does not address the Petitioner’s contentions or the factual context. Consequently, the Impugned Order was nullified.
3. The court directed the Respondent to reconsider the appeal, providing a detailed order with a clear rationale, and granting the Petitioner an opportunity for a personal hearing. As a result, the Impugned Order was set aside, and the writ petition was resolved.
Analysis of the Section:
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 unutilised ITC shall be allowed in cases other than zero-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.