Telephonic/Email Communications No Substitute For In-Person Hearing In GST Refund Claims: Bombay High Court

A Bench of Justices Ujjal Bhuyan and Abhay Ahuja held thus while deciding a plea arising from the petitioner aggrieved that its application for a Goods and Services Tax (GST) refund was rejected without being allowed a right of personal hearing

The Bench ruled,

"The expression 'opportunity of being heard' is not an expression of empty formality. It is a part of the well-recognized principle of audi alteram partem which forms the fulcrum of natural justice and is central to fair procedure."

The petitioner had applied for a refund of unutilised input tax credit under Section 16(3) of the Integrated GST Act. Five applications were filed to this effect, Following this, the Respondent GST Authority issued show cause notices which were in fact notices for rejection of application for refund.

While these notices listed reasons why the petitioner was ineligible for the refund, the petitioner was allowed a period of 15 days' to file reply and appear before the respondent authority.

After this, the petitioner's Chartered Accountant went to the respondent's office and submitted documents sought for. He was again directed to appear for production of additional documents. However, no physical proceedings took place after this exchange.

The refund applications were thereafter rejected.

While deciding the writ petition, the High Court found that a large number of e-mails had been exchanged between the parties. The petitioner's request for an opportunity to be heard was turned down, in light of the pandemic lockdown and restrictions. Petitioner was directed to submit details via e-mail which would be treated as an opportunity of hearing.

However, the Court noted that the emails recorded that the officer of the respondent-authority had not been able to view the petitioner's replies due to technical difficulties.

Though the respondents asserted that the telephonic conversations could be construed to be an extension of hearing, the petitioner contended that those conversations were for very brief periods lasting for about a minute or so in which subordinate officials working under respondent sought for documents and other information.

The Court noted that though there were telephonic conversations between the respondent-authority officials working and the petitioner's tax consultants, there were no records of such telephonic conversations at hand

The bench concluded,

"In any event, no record of such telephonic conversations have been maintained. What transpired in such conversations is also not known. Therefore, such telephonic conversations cannot be a substitute for a hearing in person or cannot be construed to be a hearing."

In this light, the Court went on to make a number of pertinent observations on the right to be heard.

The Court emphasized that by way of judicial pronouncements, the right to be heard was made central to the decision-making process, a breach of which would be a violation of the principles of natural justice.

Since this would strike at the heart of the decisionmaking process, it was open to judicial review, the Court underscored.

In the context of GST legislation, the Court pointed out that no application for refund could be rejected without giving an applicant an opportunity of being heard.

Such a right could not be substituted by telephonic conversations and exchange of e-mails, the Court ruled.

It was declared,

"When the law requires that no application for refund shall be rejected without giving an applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for a refund where no time-limit is fixed vis-a-vis rejection of the claim.

The Court also said,

"Under sub-section (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects without there being a corresponding provision for rejection of application not complete in all respects. Admittedly in this case, no hearing was granted to the petitioner. Impugned orders, therefore, would be in violation of the proviso to subrule (3) of rule 92 of the CGST Rules and also in violation of the principles of natural justice."

Moreover, since the GST officer in this case had already disclosed her mind which was adverse to the petitioner, another officer would have to be assigned to decide the matter afresh, in the interest of justice and fairness.

On these terms, the petition was allowed.