The Bombay High Court has set aside an appellate order rejecting a GST refund claim of ₹54.31 lakh, holding that the authority failed to record specific findings and passed a non-speaking order. 

The bench of  Justice G.S. Kulkarni and Justice Aarti Sathe directed the appellate authority to reconsider the matter afresh and issue a reasoned order after granting an opportunity of hearing to the taxpayer.

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The petitioner company was engaged in providing information technology software services and had entered into an agreement with a United States-based entity, Regal Beloit America Inc. (RBA), for supplying customized IT services. According to the company, all statutory conditions for treating the transactions as “export of services” under the GST law were fulfilled and therefore the supplies were made without payment of tax.

Subsequently, the company filed a refund application in Form GST RFD-01 seeking refund of ₹54,31,283 for the period from April 2020 to March 2021. The refund consisted of: IGST: ₹12,79,563; CGST: ₹20,75,860; and SGST: ₹20,75,860

The refund claim was subjected to scrutiny by the GST authorities, who issued a show cause notice questioning the admissibility of the refund. After considering the matter, the refund sanctioning authority rejected the claim. The taxpayer’s appeal against that rejection also failed, prompting the company to approach the High Court.

Before the High Court, the taxpayer argued that the appellate authority had rejected the refund claim without adequately considering the detailed submissions made during the personal hearing and the written reply filed in response to the show cause notice. The company contended that the appellate order suffered from complete non-application of mind and failed to address the core issues raised by the taxpayer.

The petitioner also relied upon several earlier Bombay High Court decisions where similar orders had been set aside because the authorities failed to deal with the contentions raised by taxpayers and did not provide proper reasons for their conclusions.

After examining the record, the Division Bench found merit in the taxpayer’s challenge. The Court observed that the appellate authority had not recorded any specific findings while rejecting the refund claim and had failed to provide a proper rationale for its conclusions.

The Bench emphasized that before rejecting a refund application, the authority is required to pass a reasoned and speaking order dealing with the taxpayer’s submissions and the issues involved. Since the impugned order lacked such reasoning, it could not be sustained in law.

The Court specifically noted that the order suffered from the vice of being a “non-speaking order” in relation to the rejection of the refund claim.

Consequently, the High Court quashed the appellate order dated 24 April 2023 and remanded the matter back to the appellate authority for fresh consideration. The authority has been directed to hear the parties again and pass a fresh order in accordance with law. The Court further directed that the exercise be completed within three months.

Importantly, the Bench kept all contentions of both sides open, meaning the taxpayer as well as the GST department will be free to advance their respective arguments during the fresh proceedings.

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