Violation of Natural Justice: Rejection of Refund Without Adjourning Hearing

Facts

The Application: The petitioner filed a refund application for the period May 2023 to June 2023 under Section 54 of the CGST Act.
The Notice: The Department issued a notice requiring a reply within seven days and fixed a date for a personal hearing.
The Request: The petitioner sought an adjournment, requesting additional time to file a formal reply to the notice.
The Action: The Authority rejected the request for adjournment and proceeded to pass a final order rejecting the refund claim without allowing the petitioner to submit their reply or attend a hearing.
The Communication: It appeared that the Authority failed to communicate the rejection of the adjournment request to the petitioner before passing the final order.

Decision

Final Verdict: In favour of the Assessee (Matter Remanded).
Ratio Decidendi:
- Mandatory Hearing: The Court emphasized that Rule 19(3) provides for a personal hearing. While an adjournment is not an absolute right, an authority cannot decline it without justifiable reasons, especially when the law mandates a hearing.
- Statutory Timeline: Under Rule 92(3), a taxpayer is entitled to a fifteen-day period to file a reply to a notice. In this case, the authority passed the order prematurely without affording this full window.
- Fairness in Practice: The rejection of a single, first-time request for an adjournment was deemed arbitrary and a violation of the principles of natural justice.
- Directive: The Court set aside the refund rejection order and directed the authority to provide a fresh opportunity for a reply and a hearing, with a minimum 72-hour prior notice.

Key Takeaways

Rule 92(3) Compliance: This ruling reinforces that the 15-day statutory period to reply to a refund show-cause notice is a mandatory procedural right. Any order passed before the expiry of this period is legally vulnerable.
Natural Justice is Paramount: Even in time-bound refund processes, “speed” cannot override “fairness.” A single request for adjournment, if reasonable, should generally be granted to ensure a fair hearing.
Adjournment Communication: Authorities are expected to communicate the rejection of an adjournment request. Silent rejections followed by final orders are considered a breach of transparency.
Professional Strategy: If an authority refuses a reasonable adjournment and passes an adverse order, taxpayers should immediately document the request and the refusal to build a strong case for “Violation of Natural Justice” in writ or appellate proceedings.

HIGH COURT OF CALCUTTA

CBF Component (P) Ltd

Union of India^*

Kausik Chanda, J.

WPA No. 23847 of 2024

APRIL 2, 2026

HImangshu Kumar Ray, Bhaskar Sengupta and Subhasis Podder for the Petitioner. Vipul Kundalia, Sr. Adv., Ekta Sinha, Anindya Kanan and Ms. Sabita Roy for the Respondent.

ORDER

1. The petitioner filed an application for refund under Section 54 of the Central Goods and Services Tax Act, 2017, in respect of the period from May 2023 to June 2023. Pursuant to the petitioner’s application, a notice dated 30th April 2024 was issued, requiring the petitioner to submit his reply within seven days from the date of the notice fixing the date of hearing on 7^th May of 2024.

2. The petitioner, however, filed an application for adjournment on 5th May 2024, seeking an extension of time to file the reply to the show-cause notice until 22nd May 2024.

3. The refund authority, by an order dated 17th May 2024, passed the final order of rejection without granting the adjournment as prayed for by the petitioner.

4. The order of rejection dated 17th May 2024 suggests that the petitioner’s adjournment request was rejected on 6th May 2024. It does not, however, appear that the refund authority communicated the said rejection to the petitioner.

5. Mr. Kundalia, the learned Advocate appearing for the petitioner, submitted that the petitioner’s adjournment request was not supported by any reason, and that the rejection of the request by the authority was therefore justified. It is further submitted that the petitioner was aware of the rejection of the adjournment, and that a hearing date had been fixed on 7^th May 2024. The petitioner, however, opted not to appear before the authority on 7th May 2024, and consequently, the refund rejection order was passed on 17^th May 2024.

6. It is submitted on behalf of the Revenue that, as a matter of law, the petitioner cannot claim adjournment as a matter of right, and that the authority was obliged to pass the refund rejection order within 60 days from the date of issuance of the show-cause notice.

7. In the circumstances, this Court is of the view that the petitioner was entitled to a period of fifteen days to submit his reply in terms of Rule 92(3) of the Central Goods and Services Tax Rules, 2017.

Rule 92(3) is quoted below:-

“Where the proper officer is satisfied, for reasons to be recorded in writing, that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and after considering the reply, make an order in FORM GST RFD-06 sanctioning the amount of refund in whole or part, or rejecting the said refund claim and the said order shall be made available to the applicant electronically and the provisions of sub-rule (1) shall, mutatis mutandis, apply to the extent refund is allowed:

Provided that no application for refund shall be rejected without giving the applicant an opportunity of being heard. “

8. In the present case, the petitioner was directed to submit his reply within seven days. It further appears that the refund rejection order dated 17th May 2024 was passed in the absence of the petitioner and without issuing any further notice.

9. Rule 19(3) of the Central Goods and Services Tax Rules, 2017, provides for the grant of a personal hearing to the petitioner. While it is true that a petitioner cannot claim an adjournment as a matter of right, it is equally true that the authority, as a matter of practice and fairness, cannot decline to grant an adjournment without any justifiable reason, particularly where the rule mandates a personal hearing.

10. In the present case, it appears that the petitioner’s single request for adjournment was rejected, and the refund rejection order was passed without affording him an opportunity to submit his reply within the fifteen-day period mandated under Rule 92(3) of the Central Goods and Services Tax Rules, 2017.

11. Accordingly, the refund rejection order dated 17th May 2024 is set aside.

12. The refund authority is directed to provide an opportunity to the petitioner to submit his reply to the show-cause notice within fifteen days from the date of communication of this order.

13. The refund authority shall communicate the next date of hearing to the petitioner at least seventy-two hours in advance, and the hearing must be concluded within one month from the date of communication of this order in accordance with law.

14. Accordingly, WPA 23847 of 2024 is disposed of.

15. There shall be no order as to costs.

16. Urgent Photostat certified copy of this order, if applied for, be given to the parties on usual undertaking.