The Gujarat High Court has set aside the rejection of a ₹3.83 lakh GST refund claim after the tax department acknowledged that a revised show cause notice had returned undelivered and directed the authority to hear the taxpayer and decide the claim afresh within 12 weeks.
The bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati found that the revised notice had not been effectively served and held that the resulting rejection order was in gross violation of the principles of natural justice and quashed the order dated 18 August 2025.
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The dispute arose from an application by India Products Private Limited for a refund of accumulated input tax credit for September 2023. The company claimed ₹3,83,583 under the inverted duty structure category, comprising ₹1,91,791 each under CGST and SGST. The application was made under Section 54 of the CGST and Gujarat GST Acts, read with Rule 89(5).
The tax authority rejected the claim on 18 August 2025. One reason recorded for the rejection was that the company had not replied to a rectification of the show cause notice issued on 16 August 2025. The authority also questioned whether the outward supply, described as a trading transaction outside the company’s core business activity, contributed to an inversion of tax rates under Circular No. 135/05/2020-GST.
The company told the High Court that it had received an earlier show cause notice dated 31 July 2025 and filed written submissions in response on 15 August. It said the subsequent rectification notice was never served on it. According to the company, rejecting the refund claim without giving it an effective opportunity to address that notice violated the principles of natural justice.
The department acknowledged in its affidavit that the notice issued on 16 August had been dispatched but returned undelivered. It said a hearing had been scheduled for 18 August and that the statutory deadline for passing the order also fell on that date. The adjudicating authority therefore proceeded on the available record, including the company’s earlier written reply.
The court directed the tax authority to grant the company an opportunity of hearing and decide the refund application afresh within 12 weeks of receiving the court’s order. It did not rule on whether the company is entitled to the refund or decide the department’s objection concerning the trading transaction.
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