The Calcutta High Court has set aside orders rejecting a company’s claim for a ₹49.60 lakh refund of unutilised input tax credit (ITC) on exports. 

The bench of Justice Smita Das De has observed that the appellate authority had relied on grounds beyond those stated in the show cause notice, depriving the company of an opportunity to answer them.

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The bench directed the tax authority to reconsider the claim after receiving a detailed response and granting a personal hearing. The Court did not order an immediate refund; it left eligibility to be decided afresh on the records.

The petitioner/assessee manufactures and exports fly ash and fly ash bricks, sought a refund of ₹49,60,054 in accumulated ITC for exports made without payment of integrated GST under a Letter of Undertaking. The claim covered December 2019 to March 2020 and was filed on September 24, 2020.

The following day, the tax authorities issued a show cause notice stating that manual shipping bill records could not be found in ICEGATE tracking. The company replied electronically and also supplied a summary sheet requested by the authorities. The adjudicating authority nevertheless rejected the refund application on November 23, 2020.

The company appealed, but the appellate authority upheld the rejection on February 19, 2022. A subsequent application seeking rectification under Section 161 of the CGST Act was disposed of on May 20, 2022. The company then approached the High Court.

The company argued that the appellate order had mechanically reproduced the adjudicating authority’s decision. More significantly, it said the appellate authority had raised issues under Rules 96A, 96B and 89(4)(c) of the GST Rules even though those issues were absent from the show cause notice. Because the grounds emerged at the appeal stage, the company said it had no proper opportunity to rebut them.

It also contended that Rules 96B and 89(4)(c) had come into effect after the December 2019 to March 2020 period involved in its claim. On Rule 96A, the company maintained that the goods had been exported within three months of the invoices.

According to the company, shipping bills, export records and other documents established that the exports had taken place. It argued that a delay or discrepancy in updating Export General Manifest or ICEGATE records should not, by itself, defeat an otherwise valid refund claim. It also sought interest on the amount withheld.

The State opposed the petition, arguing that the company had failed to produce documents necessary to establish its entitlement to the refund. It raised objections concerning domestic sale invoices and realisation of export proceeds. The State also questioned the maintainability of the writ petition, submitting that the company could appeal to the GST Appellate Tribunal under Section 112.

After reviewing the record, the High Court held that the show cause notice forms the foundation of the proceedings. An authority cannot base its decision on additional allegations without giving the taxpayer an opportunity to respond.

The Court found that the appellate authority had expanded the scope of the notice. Although the company had replied to the original allegation, it had not been given an opportunity to address the additional grounds introduced during the appeal. The Court therefore set aside the adjudication order of November 23, 2020 and the appellate order of February 19, 2022, holding that they could not be sustained.

The High Court directed the company to file a comprehensive reply within seven days, addressing both the September 25, 2020 show cause notice and the additional issues raised under Rules 96A, 96B and 89(4)(c). The tax authority must then grant a personal hearing and pass a reasoned order within four weeks. Its decision must be communicated within a further week.

The authority must independently examine the relevant consignment records and the applicability of the rules. If it finds the company eligible for the ₹49,60,054 refund, the amount is to be disbursed with interest as directed in the order.

The Court expressly declined to decide the merits of the refund claim. Its ruling requires the authorities to reconsider that claim through a procedure that gives the company a fair opportunity to address every ground relied upon.

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