GST Update

Desk of CA. Praveen Sharma – 1092 Series (CAPS)

Deficiency Memo Cannot Be Used to Reject a Time-Barred GST Refund Claim: Madras High Court

L.S. Pacific Wood Tech Pvt. Ltd. v. Commercial Tax Officer
Decision: In favour of the petitioner

The petitioner filed an application claiming a refund under the GST law. The proper officer considered the application barred by limitation and issued a deficiency memo under Rule 90(3) of the CGST Rules instead of following the prescribed adjudication procedure.

The Madras High Court observed that a deficiency memo under Rule 90(3) can be issued only for procedural or documentary deficiencies that the applicant is capable of rectifying. An objection relating to limitation is substantive in nature and cannot be treated as a procedural defect.

Accordingly, a refund application cannot be rejected as time-barred merely by issuing a deficiency memo. Where the proper officer proposes to reject a refund claim, either wholly or partly, a show-cause notice must be issued under Rule 92(3). The applicant must also be given an opportunity to submit a reply and receive a personal hearing before any adverse order is passed.

The Court, therefore, quashed the deficiency memo. However, it granted liberty to the Department to issue a proper show-cause notice under Rule 92(3) within two weeks and decide the matter in accordance with law.

Key Takeaway

A deficiency memo cannot substitute the statutory adjudication process. Rejection of a GST refund claim on the ground of limitation requires a proper show-cause notice, an opportunity to reply and a fair hearing.

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Regards
CAPS