False Claims of "Denial of Natural Justice" Lead to Penal Costs in GST Refund Case

False Claims of “Denial of Natural Justice” Lead to Penal Costs in GST Refund Case

The Legal Issue

Whether a taxpayer can successfully challenge a GST refund rejection on the grounds of “breach of natural justice” (denial of a personal hearing) when the judicial record demonstrates that multiple opportunities were provided, and whether the Court can impose penal costs for misleading statements.

Facts of the Case (Gujarat High Court)

The Dispute: The petitioners were involved in a GST refund adjudication involving alleged bogus inward supply claims totaling ₹75.27 lakh.
Procedural History:
1. First SCN (27.05.2024): Issued in FORM-GST-RFD-08, fixing a personal hearing for 11.06.2024.
2. Adjournment: The petitioners sought more time on 17.06.2024.
3. Second SCN (20.06.2024): A subsequent notice called for an appearance with documents on 29.06.2024 and required a reply by 05.07.2024.
4. Assessee Action: The petitioners filed their reply on 03.07.2024 but subsequently filed a Writ Petition alleging they were never granted a hearing.
The Allegation: The petitioners claimed a violation of Section 75(4), asserting the order was passed without an opportunity to be heard.

The Decision

The High Court scrutinized the Department’s records and found the petitioners’ assertions to be factually incorrect:

Evidence of Opportunity: The Court noted that the initial SCN explicitly scheduled a hearing. Furthermore, the second notice served as a further opportunity to present evidence.
Counsel’s Retraction: During the hearing, the petitioners’ counsel initially claimed two adjournment requests were made but failed to provide dates and eventually resiled to mentioning only one request without specific details.
Misleading the Court: Since the petitioners had actively participated by seeking time and filing a written reply within the extended window, the claim that “no hearing was granted” was deemed incorrect and false.
Imposition of Costs: To discourage the misuse of Writ Jurisdiction (Article 226) and the making of false statements under oath, the Court dismissed the petition and imposed exemplary costs of ₹50,000.
Outcome: In favour of Revenue.

Key Takeaways for Compliance

Mandatory Hearing (Section 75): While Section 75(4) makes a personal hearing mandatory where an adverse decision is contemplated, this right is considered fulfilled if the Department schedules dates and the taxpayer fails to attend or provides a reply instead.
Adjournment Limits: Under Section 75(5), an officer can grant up to three adjournments if sufficient cause is shown. Beyond this, the officer is entitled to proceed based on the record.
Duty of Candor: Petitioners must approach the High Court with “clean hands.” Misrepresenting the procedural history of a case can lead to the dismissal of the petition on grounds of conduct alone, regardless of the underlying merits of the tax dispute.

HIGH COURT OF GUJARAT

Velocity Exports LLP

Union of India^*

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 12752 of 2025
CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2026

JANUARY 16, 2026

Hasit Dave for the Petitioner. Harshvardhan Sharma, AGP and Ms. Hetal G. Patel for the Respondent.

ORDER

A.S. Supehia, J. – A categorical statement is made by the petitioners in the writ petition in paragraph No.(I) that “the adjudicating authority has committed breach of basic principles of natural justice by not granting any personal hearing in spite of repeated requests of the petitioners.”

2. We have noticed that in the Show Cause Notice in FORM-GST-RFD-08 issued on 27.05.2024, the petitioners were specifically asked to remain present for personal hearing on 11.06.2024 at 11:00 a.m.

3. Learned advocate Mr.Hasit Dave, appearing for the petitioners, on instructions from the petitioner No.2 – Mr. Mayur Mansukhbhai Chavadia, who is present before this Court, has submitted that the petitioners did not remain present on 11.06.2024.

4. Initially, a statement was made before this Court that the petitioners had requested adjournment twice before the adjudicating authority. However, when this Court specifically inquired about the dates of such requests, learned advocate Mr.Dave, on instructions of the petitioner No. 2, has submitted that he was not aware of the dates. He, thereafter, resiled from his earlier statement of having made two requests and stated that only one request was made. When this Court further inquired about the particulars of the said request, learned advocate Mr.Dave was unable to point out any specific date and has submitted that he would have to consult the Chartered Accountant.

5. We have further noticed that after issuance of the first Show Cause Notice in FORM-GST-RFD-08 dated 27.05.2024, calling upon the petitioners to remain present on 11.06.2024 for personal hearing, another Show Cause Notice in FORM GST-RFD-08 dated 20.06.2024 was issued, calling upon the petitioners to remain present with all documentary evidence on 29.06.2024 and to file their reply on or before 05.07.2024.

6. It is evident from the Show Cause Notices that the adjudicating authority recorded that the petitioners had neither produced documentary evidence nor filed any reply, and therefore the claim of inward supply relating to bogus refund of Rs.75,27,259/- stood rejected. Even thereafter, the petitioners were once again called upon to produce the necessary documents.

7. It appears that subsequently, on 17.06.2024, the petitioners sought time to file a reply to the Show Cause Notice and accordingly, the petitioners filed the reply on 03.07.2024. Thus, the statement made in the petition asserting that the petitioners were not granted any opportunity of hearing and that the adjudicating authority committed breach of basic principles of natural justice appears to be incorrect and false.

8. Hence, we direct the petitioners to deposit costs of Rs.50,000/- (Rupees Fifty Thousand Only) for making a false statement and assertion in paragraph No.(I) of the petition and for misleading this Court during the course of hearing.

9. On instructions from the petitioner No.2, who is present before this Court, learned advocate Mr.Dave has submitted that the petitioner No.2 will deposit the costs of Rs.50,000/-before Registry of this Court within a period of one week from the date of receipt of copy of this order. The same shall be subject to further hearing and further orders to be passed by this Court.

10. The matter is ordered to be listed on 30.01.2026.

11. Meanwhile, learned Assistant Government Pleader Mr.Harshvardhan Sharma, is directed to take appropriate instructions in the matter, failing which an adverse inference shall be drawn against the concerned officers.

ORDER ON CIVIL APPLICATION FOR AMENDMENT –

The present application has been filed seeking amendment in the main matter.

Having heard learned advocates appearing for the respective parties and upon considering the averments made in the application, the present application is allowed. The draft amendment shall be carried out forthwith.