This appeal, has been filed under Section 107 of the Central moods and Services Tax Act, 2017 by M/s. Nirmal Industries Private Limited., 4A Unit-II, Matasya Industrial Area, MIA District-Alwar (hereinafter also referred  to  as  “the  appellant”)  against the Order-in-Original reference No. ZN0804200416904, dated 23-4-2020 (hereinafter called as the “impugned order”) passed by the Assistant Commissioner, Central Goods & Services Tax Division-B, Alwar (hereinafter called as the “adjudication authority”).

2. Brief facts of the case :

2.1 The appellant having GSTIN No. 08AABCN1363M1ZB is engaged in manufacturing of Oil has filed refund application of ₹ 6,04,638 / – (SGST) for the period of February, 2018 of accumulated ITC on account of Inverted Tax structure under Section 54(3) of the CGST Act, 2017.

2.2  On scrutiny of refund application submitted by the appellant, the adjudicating authority has issued a Show Cause Notice in the Form RFD-08, dated 08-04-2020 reason being “Miss Match of ITC” and directed to the appellant to furnish a reply to show cause notice within fifteen days from the date of service of notice. Further, the adjudicating authority has rejected the refund claim amounting to ₹ 6,04,638/- and passed the impugned order in the Form of RFD-06 vide reference No. ZN0804200416904, dated 23-4-2020 reason being that the “appellant has not submitted any explanation regarding mismatch in ITC” and accordingly rejected amount of ₹ 5,04,638/ from the total claim amount ₹ 8,06,112/-.

3.  Being aggrieved with the impugned order in FORM-GST-RFD-06 vide reference No. ZN0804200416904, dated 23-4-2020, the appellant has filed the appeal on 23-7-2020 on the following grounds :-

(1)  As per the facts and circumstances of the case the Ld. Adjudicating Authority has failed to provide opportunity of hearing to the Appellant.

(1.1) It is humbly submitted that the Ld. Adjudicating Authority has rejected the refund claim vide the impugned Order without providing the opportunity of personal hearing to the Appellant and thus violated the principle of natural justice.

(1.2) That Section 75 of the CGST Act lays down the general provisions relating to determination of tax. Sub-section 4 of the said section specifically states that in case any adverse action is anticipated against any person then an opportunity of hearing has to be provided to the said person. The said provision reads as under.

Section 75 : General provisions relating to determination of tax

(1)…..

(4)  An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person.

Moreover, proviso to Rule 92 of Central Goods and Services Tax Rules, 2017 (hereinafter referred as `CGST Rules’) states that no application for the refund to be rejected without giving opportunity c hearing. The relevant Rule is reproduced below :

Rule 92 of CGST Rules : Order sanctioning refund

…..

(3)  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.

From the perusal of the above, provisions, it is evident that in case any adverse action is anticipated in any matter then an opportunity of hearing has to be granted to the assessee.

(1.3)  That in the present case, the Ld. Adjudicating Authority passed the Impugned Order without providing the opportunity of hearing to the Appellant. The Appellant sought time to file reply as there was nationwide lockdown due to COVID-19 pandemic. However, without considering the said reply and the existing circumstances, the Ld. Adjudicating Authority passed the Impugned Order without providing any personal hearing to the Appellant. This act of the hi Adjudicating Authority clearly proves that he was in haste to reject the refund of the Appellant and thus he has not only contravened the law but has also violated the principle of natural justice of ‘audi alteram partem’

(1.4) In light of above submissions and decisions, it is humbly submitted that in present case, the Ld. Adjudicating Authority has not only acted in contravention to the provisions of the CGST Act r /w CGST Rules, but also against the principle of natural justice. Hence, on this very ground only, the Impugned Order is liable to be quashed and set aside.

(2)  The Ld. Adjudicating Authority, has erred, in not considering Notification No. 35/2020-Central Tax, dated 3-4-2020.

(2.1) Without prejudice to above submissions, it is humbly submitted that while passing the Impugned Oder, the Ld. Adjudicating Authority failed to consider extension of time limit for submitting reply as per Notification No. 35/2020-Centrel Tax, dated 3-4-2020 thereinafter referred as ‘Notification’) as amended from time to time.

(2.2) That, in view of spread of COVID-19, across many countries including India, the Government extended the time limit for filing of reply, as per provisions of CGST Act, if the said reply has to be filed during period 20-3-2020 to 30-8-2020. As per the said Notification, the time limit has been extended upto 31-8-2020. The copy of the  Notification is annexed herewith and marked as Annexure-A. Further, vide the Notification, the time limit for issuance of order has also been extended to 31-8-2020. However, without considering the extension of time provided by the Notification, the Ld. Adjudicating  Authority hastily passed the Impugned Order.

(2.3) That as per the Notification, the Appellant had the time till 31-8- 2020 to file reply to the SCN. Thus, the Ld. Adjudicating Authority  ought to have granted time till 31-8-2020 to the Appellant to file reply to SCN as per the Notification. However, without considering the said fact, the Ld. Adjudicating Authority passed the Impugned  Order in contravention with the Notification.

(2.4) That the Ld. Adjudicating Authority has also been granted time to  pass the order till 31-8-2020. Thus, there was no limitation period  which was running due to which the Ld. Adjudicating Authority  has to pass the Impugned Order. However, the Ld. Adjudicating  Authority, suo moto without considering the Notification and the  request made by the Appellant to grant time to file reply, passed the  Impugned SCN in contravention with the Notification.

(2.5) In the light of the above submissions, it is humbly submitted that the Ld. Adjudicating Authority has failed to consider the extension of time granted by the Notification and has passed the Impugned Order in contravention with the provisions of Notification.

(3)  The Ld. Adjudicating Authority failed to consider that the Appellant is entitled for the refund of ₹ 6,04,638/-.

(3.1) Without prejudice to, above submissions, it is humbly submitted that the Ld. Adjudicating Authority has failed to consider that the  Appellant is entitled to get the refund of ITC of ₹ 6,04,638/-.

(3.2) That as per Section 54(3)(b) of the CGST Act, a registered person can claim the refund of the unutilized input tax credit accumulated due  to rate of inputs being higher than rate of put supplies. Thus, in  terms of Section 54(3)(b) of the CGST Act, the Appellant is liable to Get refund of the entire amount of unutilized input tax credit accumulated due to inverted duty rate structure. Further, as per Rule 89 of the CGST Rules, procedure has been prescribed according to which refund application may be filed for claiming refund. As per 89(2)(h) of the CGST Act, while filing the refund application in Form GST RFD-01, the applicant has to submit the statement containing the number and date of invoices received and issued during the tax period for which refund claim is filed in case of refund under Section 54(3)(b) of the CGST Act. The relevant rule is reproduced below :

Rule 89 of CGST Rules : Application for refund of tax, interest, penalty, fees or any other amount.

(2)  The application under sub-rule  (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant,

…..

(h) a statement containing the number and the date of the invoices received and issued during a tax period in a case where the claim pertains to refund of any unutilised input tax credit under sub-section

(3)  of section  54 where the credit has accumulated on account of the rate of tax on the inputs being higher than the rate of tax, on output supplies, other than nil-rated or fully exempt supplies; Thus, the Appellant duly submitted the said statement with the refund claim. The copy of the refund application is annexed herewith.

(3.3)  Further, as per the SCN it has been remarked that the net ITC as per Application is ₹ 1,45,70,207.83/- but as per the documents provided by the Appellant, the net ITC is ₹ 1,39,65,569.55/-. It is humbly submitted that the net ITC mentioned by the Appellant in the refund application i.e. ₹ 1,45,70,207.83 /- is as per the balance of the Net ITC in Form GSTR-3B of the Appellant less the amount of input tax credit on account of input services and capital goods. The copy of Form GSTR-3B is annexed herewith. The Appellant also submitted Form GSTR-2A and the department considered the net ITC mentioned in Form GSTR-2A less the amount of input tax creditor account of input services and capital goods i.e. ₹ 1,39,65,565.55 as the Net ITC and rejected the refund claim on account of mismatch in the Net ITC in Form GSTR-3B and Form GSTR-2A.

(3.4)  That it is humbly submitted that the Net ITC reflected in Form GSTR-3B includes the ITC availed on invoices /documents relating to imports, ISD invoices and the inward supplies liable to reverse charge. However, the said details are not reflected in Form GSTR-2A. Thus, mismatch in GSTR-3B and GSTR-2A may occur due to the ITC availed on imports, ISD supplies and RCM supplies. The issue pertaining to the ITC on imports, ISD supplies and RCM supplies in cases fating under Section 54(3) of the CGST Act, has also been recognized in Circular No. 139/09/2020-GST, dated 10-6-2020 (herein-after referred as ‘Circular). In the said Circular it has been specified that the refund of. ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to reverse charge shall be granted even if the details of the same are not reflected in the Form GSTR-2A. The copy of the Circular is annexed herewith.

(3.5)  Without prejudice to the above, it is humbly submitted that the difference in the GSTR-2A and GSTR-3B may also occur due to the timing difference in uploading of the invoices in GSTR-1 by the supplier. In such cases, it may happen that the invoices may get uploaded by the supplier in its GSTR-1, either in earlier/following month than the month in which credit of the same is taken by the recipient in its GSTR-3B. Thus, the said credit is reflected in the GSTR-2A of the registered person either in earlier or the following month. In this regard, the Circular mentions that the credit in respect of which refund is filed has to be reflected in the GSTR-2A of the recipient. However, it is nowhere mentioned that the same has to be reflected in the GSTR-2A of the month for which refund is filed. In absence of such a language, it can be inferred that the Legislature allows refund of the credit of supplies which are reflected even in the GSTR-2A of the registered person for earlier or subsequent month than the month for which refund application is filed.

(3.6)  In the light of above submissions, it is humbly submitted that the difference/mismatch in the Net ITC in Form GSTR-2A and GSTR-3B may occur due to various reasons. However, as mentioned above, the refund should be granted even in case of the mismatch in ITC as per the language of the provisions and the Circular. Accordingly, the Impugned Order deserves to be quashed as set aside and Appellant should be granted refund of ₹ 6,04,638-/-.

4.  The appellant has also placed reliance in their defence on the following decisions :-

IPC Packaging Company Pvt. Ltd. v. Add. C.C., ICD, Bangalore – 2017 (6) G.S.T.L. 256 (Kar.)

Calcom Vision Ltd. [2008 (11) S.T.R. 212 (Tri.  Del.)]

Amman Match Company [2018 (363) E.L.T. 120 (Mad.)]

Kerala Co-Op. Dev. & Welfare Fund Board v. Union of India  [2018  (13) G.S.T.L. 262 (Ker.)],

Thilagarathinarn Match Works v. Commissioner of C. Ex., Madurai  [2018 (362) E.L.T. 393 (Mad.)] the Hon’ble Madras.

Micro Tech System v. Asstt. Commr., SGST, Alappuzlia [2018 (18) G.S.T.L. 9 (Ker.)],

That from the above decision it is evident that before rejection the refund claim, the assessees should be provided with the opportunity- of personal hearing and then the speaking order has to be passed. In the present case, it is apparent that there is violation of natural justice. Hence, the Impugned Order needs to be set aside.

On perusal of above decisions, it is humbly submitted that while passing an order for rejection of refund claim a fair opportunity has to be granted to the assessee to defend himself. It is after considering the submissions made by the assessee and providing him an opportunity of hearing, the final order should be passed. However, in the present case, without considering the situations surrounding the Appellant and the difficulties being faced due to nationwide lock-down, the Ld. Adjudicating Authority passed the Impugned Order. The said act of deciding the matter is against the principle of natural justice. Hence, the same is liable to be set aside.

5.  Personal Hearing in the case was held on 18-12-2020 through video conference, wherein, Shri Rahul Lakhwani, Advocate, appeared on behalf of appellant for personal hearing through video conference and reiterated the grounds of appeal already made in their appeal memo and explained in details. Further, he requested for early decision of the case.

6.  I have carefully gone through the case records, and written submission made in the appeal memo as well as oral submissions made at the time of personal hearing and Order-in-Original Accordingly, I proceed to decide the case.

7.  On going through the refund sanction/rejection order I find that the adjudicating authority has rejected the appellant’s refund claim amounting to ₹ 6,04,638/- as appellant did not submit any explanation regarding mismatch in ITC. Further, I find that before passing the said order adjudicating authority had issued show cause notice in Form RFD-08, dated 8-4-2020 reason stated therein that it appears refund application is liable to be rejected on account of mismatch of ITC amount ₹ 6,04,638/- and it was directed to appellant to furnish a reply to this notice within 15 days from the date of service of this notice and also directed to appear before adjudicating authority on 23-4-2000. In response to the said show cause notice, appellant submitted GST RFD-09, dated 9-4-2020 where-in, he stated that he is not able to submit their reply due to lockdown period and requested to allow them to submit their reply within 7 days after lifting of lock down period and also attached a letter in this regard with the RFD-09.

8.  Further, I find that the appellant has taken the main plea in their ground of appeal that adjudicating authority has rejected the refund claim without providing the opportunity of personal hearing in the instant matter and thus has violated the principle of natural justice. Moreover, the appellant has emphasized the various reasons for mismatch of ITC between GSTR-3B and GSTR-2A and stated that he is entitled for the refund of ₹ 6,04,638/- in terms of Circular No. 139/09/2020-GST, dated 10-6-2020, which has not been considered by the adjudicating authority.

9.  In view of the above facts, I find that the appellant did not get the proper opportunity to submit their reply/submission in their contention before the adjudicating authority. Further, he did not get opportunity of being heard. The reason of non-submission of reply and not appearing for personal hearing before the adjudicating authority is acceptable in terms of Notification No. 35/2020-Central Tax, dated 3-4-2020. As per the notification the time limit for filing of reply by taxpayers was extended upto 30-8-2020 due to COVID-19 spread.

10. Further, sub-sections (4), (5) and (6) of Section 75 of CGST Act, 2017 is also relevant in the matter.

(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.

(5) The proper officer shall, if sufficient cause is shown bv the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing;

Provided that no such adjournment shall be granted for more than three  times to a person during the proceedings.

(6) The proper officer, in his order, shall set out the relevant facts and the  basis of decision.

11. In this matter, as per first proviso to sub-rule (3) of Rule 92 of CGST  Rule, 2017 – Where the proper officer is satisfied, for reasons to be recorded in  writing, that the whole or any part of the amount c].aimed 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 CST 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.

12. In view of the above legal provisions, I find that the adjudicating authority while rejecting the refund claim of the appellant neither considered their request nor their first request for seeking adjournment of personal hearing  due to COVID-19 lockdown in terms of Notification No. 35/2020-Central Tax, dated 3-4-2020. Moreover, the adjudicating authority did not discuss elaborately mismatch of ITC aspect. I also find that passing of non-speaking order indeed amount to denial of natural justice. Before passing of order their request for seeking adjournment for personal hearing in the matter should have been considered and speaking order should have been passed by giving proper opportunity of personal hearing in the matter to the appellant and detailing factors leading to rejection or refund claim should have been discussed. Else such order would not be sustainable in the eyes of law, Therefore, I remand back the case to the adjudicating authority for decide the case afresh by following the principle of natural justice and for passing the speaking order in view of submission of appellant. The appellant is also directed to submit all relevant documents/ submission before the adjudicating authority.

13.  Accordingly, the appeal is disposed off in the above manner.