Facts of the Case:

In this case, the GSTAT (Thane) decided a batch of 39 appeals filed by Mr. Vikram Inderjit Kapur, Director of M/s Lavino Kapur Cottons Pvt. Ltd., against orders confirming the partial rejection of refund claims for various tax periods from June 2019 to September 2022. The company was a 100% Export Oriented Unit engaged in the manufacture and export of absorbent cotton and claimed refunds of accumulated Input Tax Credit under Section 16(3)(a) of the IGST Act, 2017.

The lead matter concerned the refund claim for August 2020, under which the company had sought a refund of ₹63,17,232. The Proper Officer, through an order in Form GST RFD-06 dated 12.01.2021, partially sanctioned the claim but rejected ₹18,09,402 on the ground of “Mismatch of ITC”. Before rejecting the refund, the Proper Officer had neither issued a show cause notice in Form GST RFD-08 nor provided an opportunity to submit a reply in Form GST RFD-09 or a personal hearing.

Although the First Appellate Authority acknowledged the violation of Rule 92(3) of the CGST/MGST Rules, 2017, it nevertheless upheld the rejection on the ground that the taxpayer had failed to furnish certain supporting documents during the appellate proceedings. Aggrieved, the appellant approached the Tribunal, contending that the mandatory statutory procedure had been bypassed and that its reconciliation and submissions concerning the COVID-19 relaxation of Rule 36(4) had not been properly considered.

Issue:

Whether a refund claim could be rejected wholly or partially on the ground of ITC mismatch without issuing the mandatory notice in Form GST RFD-08 and providing an opportunity of hearing as prescribed under Rule 92(3) of the CGST/MGST Rules, 2017. Whether the procedural defect at the original adjudication stage could be cured by granting the taxpayer an opportunity to produce documents and make submissions during the first appeal, and whether the impugned orders consequently required to be set aside and the refund applications remanded for fresh adjudication.

Held That:

The Tribunal held that Rule 92(3) of the CGST/MGST Rules, 2017, prescribes a mandatory procedure for rejecting a refund claim. Where the Proper Officer considers the whole or any part of the claimed refund inadmissible, the officer must issue a notice in Form GST RFD-08, requiring the applicant to furnish a reply in Form GST RFD-09 within the prescribed period. The proviso to the rule further prohibits rejection of a refund application without giving the applicant an opportunity of being heard. The Tribunal observed that the statutory language leaves no discretion to dispense with these requirements before passing an adverse refund order.

The Tribunal rejected the Revenue’s contention that the opportunity of hearing afforded during the appellate proceedings cured the original procedural defect. It held that a post-decisional hearing at the appellate stage cannot substitute for the pre-decisional notice and opportunity mandated by law. The failure to issue Form GST RFD-08 deprived the appellant of the opportunity to know the precise grounds of the alleged ITC mismatch and to furnish a specific, evidence-based reply before the refund was rejected. The Tribunal further observed that, once the Order-in-Original was found legally unsustainable for breach of mandatory procedure and natural justice, the consequential Order-in-Appeal could not be sustained merely because the appellate authority had subsequently afforded opportunities to produce documents.

Accordingly, the Tribunal set aside the impugned Orders-in-Appeal and the corresponding Orders-in-Original to the extent they rejected the refund claims in all 39 appeals. The matters were remanded to the Proper Officer for fresh, de novo processing, keeping all issues open. The Proper Officer was directed, if any portion of the refund was found inadmissible, to issue a proper and detailed Form GST RFD-08 notice, subject to applicable statutory provisions and timelines, specifying the invoice-wise details of the alleged ITC mismatch or other grounds for rejection; allow the appellant to submit a reply in Form GST RFD-09 with supporting reconciliations and evidence; provide an opportunity of personal hearing; and pass a speaking and reasoned order in Form GST RFD-06. The appellant was also directed to cooperate and produce the requisite evidence. The Tribunal expressly refrained from deciding the substantive merits of the ITC mismatch or the applicability of the COVID-19 relief measures. All 39 appeals were allowed by way of remand. The order was pronounced on 22.10.2026.

Key Takeaways- A hearing granted at the appellate stage does not cure the failure to issue a mandatory pre-decisional show cause notice under Rule 92(3). Before rejecting a GST refund claim on account of ITC mismatch, the Proper Officer must issue Form GST RFD-08, disclose the grounds of proposed rejection, provide an opportunity to reply and be heard, and pass a reasoned order. Where this mandatory procedure has been bypassed, the appropriate course may be to set aside the rejection and remand the matter for fresh adjudication, without prejudging the taxpayer’s substantive refund entitlement.

Case Name: VIKRAM INDERJIT KAPUR Versus RAJESH CHANDRAKANT VISHE, DEPUTY COMMISSIONER OF STATE TAX dated 22.10.2026