Facts of the Case:
In this case, the petitioner, a private limited company, was originally allotted a plot by the Gujarat Industrial Development Corporation (GIDC) on leasehold basis. Subsequently, by an Assignment Deed dated 22.12.2021, the petitioner transferred/assigned the leasehold rights in the GIDC plot to M/s Tatva Chintan Pharma Chem Ltd. for consideration. Pursuant to the said transaction, the Assistant Commissioner of State Tax (Enforcement), Vadodara issued multiple summons under Section 70(1) of the GST Act seeking details regarding the assignment of leasehold rights. After examination of the documents, the department issued a calculation sheet dated 17.04.2023 directing the petitioner to pay GST along with interest @18% on the alleged taxable supply arising from the assignment of leasehold rights. The petitioner, disputing the very leviability of GST on such assignment, nevertheless paid the interest amount under protest through Form DRC-03. Subsequently, relying on the Gujarat High Court judgment in Gujarat Chamber of Commerce v. Union of India , which held that assignment of leasehold rights in GIDC plots is a transaction relating to immovable property and not exigible to GST, the petitioner filed a refund application in Form GST RFD-01 on 14.07.2025 under Section 54 of the GST Act seeking refund of the interest paid under protest.
However, the respondent authority issued a Deficiency Memo in Form GST RFD-03 dated 15.07.2025 under Rule 90(3) of the CGST Rules, rejecting the refund application on the ground that there was no notification or circular issued by the GST Council permitting such refund. Aggrieved thereby, the petitioner approached the Gujarat High Court.
Issue:
Whether the refund application filed by the petitioner could be rejected at the threshold by issuing a deficiency memo in Form GST RFD-03 on the ground that there is no notification or circular issued by the GST Council permitting such refund.
Held that:
The Court observed that Rule 90(3) of the CGST Rules, 2017 permits issuance of a deficiency memo only in cases where the refund application is incomplete or suffers from procedural or documentary deficiencies. The said provision does not empower the proper officer to reject or return a refund application on substantive grounds or on an interpretation of taxability.
The Court further held that rejection of the refund application on the ground that there is no notification or circular issued by the GST Council permitting such refund is wholly misconceived. The absence of a notification or circular cannot be a valid basis for issuing a deficiency memo, particularly when the refund claim is founded on statutory provisions under Section 54 of the CGST Act and supported by a binding judicial pronouncement of the High Court itself in Gujarat Chamber of Commerce v. Union of India.
It was emphasized that once a refund application is filed in the prescribed form along with requisite documents, the proper officer is duty-bound to examine the claim on merits and pass a reasoned order in accordance with law. The authority cannot short-circuit the adjudicatory process by issuing a deficiency memo for reasons extraneous to Rule 90(3), thereby depriving the assessee of a substantive adjudication.
The Court also took note of the fair stand taken by the learned Assistant Government Pleader, on instructions from the concerned Deputy Commissioner, that the deficiency memo deserved to be quashed and that the refund application should be considered afresh. Accepting the said statement, the Court held that the refund application dated 14.07.2025 shall stand revived.
The High Court held that the impugned deficiency memo issued in Form GST RFD-03 dated 15.07.2025 was unsustainable in law and liable to be quashed.
Case Name: Meghaaarika Enterprises Private Limited & Anr. Versus State of Gujarat & Anr. dated 18.12.2025
To read the complete judgement 2025 Taxo.online 3385
