Reasonless RFD-08 Notice Vitiates GST Refund Rejection: Rajasthan HC in Maple Luxury Homes v. State of Rajasthan

In M/s Maple Luxury Homes v. State of Rajasthan & Anr. (2024:RJ-JP:18018-DB), the Rajasthan High Court held that Rule 92(3) of the CGST Rules incorporates natural justice and was completely violated (paras 11, 16–17). A Division Bench of Manindra Mohan Shrivastava, CJ and Bhuwan Goyal, J allowed the writ petition and set aside six RFD-06 orders dated 13.09.2023 (paras 17–18). The proper officer must now issue a proper RFD-08 notice, take a reply and pass a fresh order (para 17).

Headnote: Rule 92(3) Refund Show Cause Notice

CGST Act, 2017 – Section 54 – CGST Rules, 2017 – Rule 92(3) – FORM GST RFD-08 / RFD-09 / RFD-06 – Refund of tax on cancelled flat booking – Reasons for proposed rejection – Natural justice – Alternative remedy – Remand

Held: (i) Rule 92(3) incorporates the principles of natural justice and mandatorily requires the proper officer to communicate the reasons for proposed rejection, obtain a reply and only then pass an order (paras 11, 16). (ii) An RFD-08 notice that merely recites an unrelated, vague formula is "no reason at all" and reduces the exercise to an empty formality (para 12). (iii) Where the ground of rejection in the final order (passing on of tax incidence under Section 54(8)(e)) was not stated, even briefly, in the notice, the notice is a farce and the order is vitiated (paras 14–15). (iv) Once the statutory provision embodying natural justice is completely violated, the objection of alternative remedy does not hold water (para 17). (v) The RFD-06 orders were set aside and the matter remitted for a proper RFD-08 notice, reply and fresh order (para 17).

(paras 9–18)

Case Details: Maple Luxury Homes (2024:RJ-JP:18018-DB)

Final Outcome: Writ petition allowed; six RFD-06 orders dated 13.09.2023 set aside; matter remitted for fresh RFD-08 notice and fresh order (paras 17–18)

Case: M/s Maple Luxury Homes v. State of Rajasthan & Anr.

Neutral Citation: 2024:RJ-JP:18018-DB

Case No.: D.B. Civil Writ Petition No. 17061/2023

Court: Rajasthan High Court, Bench at Jaipur (Division Bench)

Date of Decision: 18 April 2024

Bench: Manindra Mohan Shrivastava, CJ and Bhuwan Goyal, J (order of the Division Bench; authoring judge not indicated on the order)

Relevant Acts & Sections: Section 54 (including Section 54(8)(e)), Central Goods and Services Tax Act, 2017; Rule 92(3), Chapter X, Central Goods and Services Tax Rules, 2017; FORMS GST RFD-01, RFD-06, RFD-08, RFD-09

Impugned Order: Orders in FORM GST RFD-06 dated 13.09.2023 (Nos. ZD080923029414B, ZD080923029531D, ZD0809230295628, ZD0809230294563, ZD0809230294919 and ZD080923029580A), Assistant Commissioner, State Tax, Ward-II, Circle-D, Zone-II, Jaipur, Commercial Tax Department (paras 2, 17)

Counsel: Mr. Ravi Gupta, Advocate, for the petitioner; Mr. Jai Lodha, Advocate, for respondent No. 1; Mr. Sandeep Pathak, Advocate, for respondent No. 2

Source: Rajasthan High Court (official website)

Key Holdings of the Rajasthan High Court

• Rule 92(3) of the CGST Rules, 2017 incorporates the principles of natural justice within the GST refund scheme (paras 11, 16).
• The proper officer must state clearly, in the RFD-08 notice, the reasons for his tentative satisfaction to reject the refund wholly or in part (para 11).
• A vague, mechanical recital in the RFD-08 notice "is no reason at all" and makes the notice an empty formality (para 12).
• A rejection resting on a ground never put to the applicant in the notice is in apparent violation of Rule 92(3) (paras 14–16).
• Complete violation of a statutory provision embodying natural justice defeats the objection of alternative remedy (para 17).

Brief Facts of the Case

The petitioner, M/s Maple Luxury Homes, is engaged in construction and development business. It received advance consideration from a buyer for agreed supply of a flat. It discharged GST on that advance in its GSTR-3B returns filed from time to time (para 3).

Before construction was completed, the flat booking was cancelled "due to a casualty", as stated in the petition. Since the supply was never completed, the petitioner claimed refund of the GST paid (paras 3–4).

On 07.12.2022, the petitioner applied for refund of GST paid for October 2020, December 2020, March 2021, June 2021, September 2021 and December 2021 (para 4).

The proper officer was not satisfied with the claim. Notices in FORM GST RFD-08 were issued, and the petitioner replied in FORM GST RFD-09. Six notices carried an identical statement of reasons (paras 5, 12).

Orders in FORM GST RFD-06 dated 13.09.2023 then rejected the claims for each period. The order for October 2020, extracted in Hindi, recorded that the tax burden had been shifted to the buyer and invoked Section 54(8)(e) (para 14).

That order notes that, under the cancellation agreement, Rs. 9,61,062 was deducted and only Rs. 76,88,938 was paid to the buyer. It rejected refund application ARN AA081222013516N dated 07.12.2022 for Rs. 2,64,000 (para 14) [figures read from the Hindi extract; translation to be verified from certified copy].

Issues Before the High Court

The Court did not frame issues formally. From the submissions recorded, the questions were:

1. Whether the RFD-08 notices complied with Rule 92(3) of the CGST Rules, 2017, which requires reasons for proposed rejection of refund (paras 2, 6).
2. Whether rejection of refund on a ground not disclosed in the notice violated the statutory scheme of natural justice (paras 6–7).
3. Whether the writ petition was barred by the availability of an alternative statutory appeal (para 8).

Court's Findings and Reasoning

Petitioner's case (para 6): The petitioner argued that Rule 92 engrafts natural justice into the statute. It mandates a notice stating reasons when the authority is not satisfied with a refund claim. The RFD-08 notice was "completely non-speaking", so the reply was speculative, and the real reason surfaced only in the final order (para 6).

Revenue's case (paras 7–8): The respondents said the petitioner was raising only technical grounds. The notice was issued in the prescribed RFD-08 proforma under Section 54 read with Rule 92, and the tentative reason was clearly stated (para 7).

The petitioner had replied without objecting to the notice, and refund was rejected mainly for passing on of incidence (para 7). An efficacious appeal remedy, they said, barred the writ (para 8).

Statutory scheme of refund (paras 9–10): Chapter X of the CGST Rules makes "exhaustive provisions" on refund procedure (para 9). Rule 92(3)'s proviso bars rejection without a reasonable opportunity of hearing (para 10).

Rule 92(3) embodies natural justice (para 11): The Court gave the provision a "fair, logical and rational interpretation". Where the officer finds the refund inadmissible, he must issue an RFD-08 notice and seek a reply in RFD-09 (para 11).

But for this rule, tentative reasons need not have been communicated at all. Its purpose "seems to minimise the error in the decision making process", and the final order must consider the reply (para 11).

The RFD-08 notices gave no reason (para 12): All six notices contained an identical, garbled statement that the claim of "excess of payment of tax" did not fall within Section 54. The Court held this was "no reason at all" and "as vague as it could be" (para 12). The authority "only completed an empty formality" (para 12).

Reply on speculation (para 13): The Court accepted that the assessee, "speculating as to what could possibly be the reason", filed its reply. This answered the Department's plea that the petitioner had not objected to the notice (para 13).

New ground surfaced only in the order (paras 14–15): The RFD-06 orders disclosed the Section 54(8)(e) ground for the first time (para 14). That ground "was not at all stated, even briefly" in the notice, making it "a farce and an empty formality" (para 15).

Violation of statutory natural justice (para 16): As the officer never disclosed the reason for his tentative decision, the Court found an "apparent violation" of statutory natural justice (para 16).

Application to facts (para 17): Rule 92(3) was "completely violated". On that finding, the objection based on alternative remedy "would not hold water" and was rejected, and the orders were set aside (para 17).

Final Outcome and Directions

• The six orders in FORM GST RFD-06 dated 13.09.2023 were set aside (para 17).
• The matter was remitted to the proper officer to issue a proper notice in FORM GST RFD-08 (para 17).
• The officer must obtain the petitioner's reply and then pass an appropriate order in accordance with law (para 17).
• The objection of alternative remedy was rejected, and the writ petition was allowed (paras 17–18).
• The order is silent on costs, on any time limit for the fresh decision, and on interest on delayed refund.

Legal Principle Laid Down

Under Section 54 of the CGST Act read with Rule 92(3) of the CGST Rules, a proper officer proposing to reject refund must communicate, in FORM GST RFD-08, the actual reasons for that tentative view. The applicant must be able to answer them in RFD-09, and the RFD-06 order must consider that reply. A final order on a ground not disclosed, even briefly, in the notice violates statutory natural justice, justifying writ interference despite an appeal remedy and remand for a fresh notice (paras 11–12, 15–17).

Precedents Relied Upon

• No precedent is cited in the order. The Court decided on the text and object of Rule 92(3) read with Section 54 (paras 9–17).

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 11 (object of Rule 92(3)): "The Rule making authority in its wisdom has laid down that whenever there is a satisfaction arrived at to reject wholly or in part the claim for refund, a notice is required to be mandatorily issued clearly stating the reasons for such satisfaction arrived at by the proper officer. This provision has been included in the Rules of 2017 to ensure that before rejection of the claim, the applicant comes to know why his application is being rejected so that he could get an opportunity to satisfy the authority that the tentative reason/satisfaction is not correct."

Para 12 (no reason at all): "In our considered view, that is no reason at all. The reason assigned, if we may say so, is as vague as it could be. It appears that authority only completed an empty formality. It did not disclose for what reasons the authority formed a tentative satisfaction to reject the claim for refund. The reason as disclosed, if we may say so, is mechanical and discloses nothing."

Para 15 (notice a farce): "If what has been stated in the GST-RFD-08 notice with regard to reasons is juxtaposed with the reasons which have been assigned in the impugned order to reject the claim of refund, it would be clear that what was stated in the impugned order to reject claim for refund was not at all stated, even briefly, in the show cause notice issued under Rule 92(3) of the Rules of 2017. It is, thus, apparent that the issuance of show cause notice was a farce and an empty formality by the authority rather than making it a meaningful exercise requiring the assessee to offer its explanation/reply to the reasons for proposed rejection of application for claim of refund."

Para 16 (natural justice): "The provisions contained in Rule 92(3) of the Rules of 2017 incorporate the principles of natural justice as it mandates and obligates the proper officer to disclose to the applicant the reason for his tentative decision to reject refund application with an object to invite response, consider the same and pass the order. Therefore, there is apparent violation of statutory provisions incorporating principles of natural justice."

Practical Impact of the Ruling

• For taxpayers: Insist that the RFD-08 notice state the specific ground of proposed rejection. An RFD-06 order on a new ground is open to challenge under Rule 92(3) itself (paras 11, 15–16).
• For real estate developers: Refund on cancelled flat bookings cannot be rejected on the "passing on of incidence" ground unless it is first put in the notice (paras 3–4, 14–15).
• For the department: RFD-08 notices should carry case-specific reasons, including the exact limb of Section 54(8) relied upon. Template recitals invite remand and delay (paras 12, 15).
• For practitioners: Replying to a vague notice does not waive the defect, as a speculative reply does not cure the absence of reasons (paras 7, 13).
• On the merits: The ruling does not decide unjust enrichment or entitlement to refund. Those issues remain open for fresh adjudication (para 17).

FAQs on Rule 92(3) Refund Show Cause Notice

1. What did the Rajasthan High Court hold in Maple Luxury Homes v. State of Rajasthan?

The Court held that refund rejection orders in FORM GST RFD-06 were invalid because the RFD-08 notices gave no real reason for proposed rejection. It set aside six orders dated 13.09.2023 and remitted the matter for a fresh notice and decision (paras 12, 15–17).

2. What must a Rule 92(3) refund show cause notice contain?

It must clearly state the reasons for the proper officer's satisfaction that the refund is wholly or partly inadmissible. The applicant must be able to answer those reasons in RFD-09 before any final order is passed (para 11).

3. Can a GST refund be rejected on a ground not mentioned in the RFD-08 notice?

No. The Court held that rejecting refund on a ground "not at all stated, even briefly" in the notice makes the notice a farce and violates the natural justice built into Rule 92(3) (paras 15–16).

4. Is a writ petition maintainable against a refund rejection order when an appeal lies?

Yes, where Rule 92(3) is completely violated. The Court held that the alternative remedy objection "would not hold water" once the statutory provision embodying natural justice was breached (para 17).

5. What relief did Maple Luxury Homes get from the Rajasthan High Court?

The six RFD-06 orders were quashed, with a remand for a proper RFD-08 notice, a fresh reply and a fresh order. The Court did not direct grant of refund or interest and left the merits open (para 17).

Keywords: 2024:RJ-JP:18018-DB, Maple Luxury Homes v. State of Rajasthan, Rule 92(3) refund show cause notice, Rule 92(3) CGST Rules, Section 54 CGST Act, Section 54(8)(e), FORM GST RFD-08, FORM GST RFD-06, GST refund rejection, natural justice, alternative remedy, cancelled flat booking, tax litigation lawyer, Rajasthan High Court, Manindra Mohan Shrivastava CJ

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Download Judgment PDF – Maple Luxury Homes v. State of Rajasthan

Judgment PDF: 2024:RJ-JP:18018-DB – M/s Maple Luxury Homes v. State of Rajasthan & Anr. (D.B. Civil Writ Petition No. 17061/2023) – The judgment PDF will be uploaded here shortly.

Source: Rajasthan High Court (official website).

Read more: Rajasthan High Court · GST · GST Refund · Indirect Tax