Court directs authorities to follow Rule 92(3) of GST Rules for time-barred refund claims, emphasizing the need for a show cause notice and hearing opportunity before rejection.
In a significant judgment delivered on September 1, 2026, the Madras High Court clarified the procedural requirements for rejecting Goods and Services Tax (GST) refund claims, particularly those challenged as time-barred. The case, L.S. Pacific Wood Tech Pvt. Ltd. v. Commercial Tax Officer, Nanganallur Assessment Circle, Chennai, was decided by Justice Senthilkumar Ramamoorthy.
The petitioner, L.S. Pacific Wood Tech Pvt. Ltd., had applied for a GST refund under Section 54 of the GST statutes. The respondent, the Commercial Tax Officer, issued a deficiency memo dated April 16, 2026, stating that the refund claim was time-barred and therefore rejected the claim on that ground.
Challenging this action, the petitioner argued that the issuance of a deficiency memo on the basis of limitation was improper. The petitioner's counsel contended that a deficiency memo under Rule 90(3) of the GST Rules is only appropriate when there is a remediable defect in the refund application that can be corrected by filing a fresh application. They further argued that rejection of a refund claim on the ground of limitation requires the issuance of a show cause notice under Rule 92(3), which allows the applicant an opportunity to respond before a final decision is made.
The Court examined the provisions of the GST Rules, particularly Rule 92(3), which states that if the proper officer is of the opinion that the refund claim or part of it is inadmissible, they must issue a notice in Form GST RFD-08 requiring the applicant to furnish a reply in Form GST RFD-09 within fifteen days. Only after considering the reply, the officer can pass an order in Form GST RFD-06 sanctioning or rejecting the refund claim. The rule also mandates that no refund shall be rejected without giving the applicant an opportunity of being heard.
Justice Ramamoorthy emphasized that the correct procedure when a refund claim is time-barred is to issue a show cause notice under Rule 92(3) and not a deficiency memo under Rule 90(3). The deficiency memo is intended for rectifiable defects and not for limitation issues. The Court held that the respondent's issuance of a deficiency memo on the ground of limitation was not in accordance with the statutory provisions and consequently set aside the deficiency memo.
The writ petition was disposed of with the direction that the respondent may issue a show cause notice within two weeks from the receipt of the Court's order if they intend to reject the refund claim wholly or partly on limitation grounds. The petitioner must be given an opportunity to respond before any final rejection order is passed. The Court prohibited any further action based on the impugned deficiency memo.
This judgment reinforces the procedural safeguards available to taxpayers under the GST regime, ensuring that refund claims are not rejected summarily without proper notice and hearing, thereby protecting their legal rights.
Bottom Line:
GST refund - Refund application cannot be treated as defective and rejected by issuing deficiency memo on ground of limitation - If refund claim is proposed to be rejected wholly or partly as time barred, proper course is to issue show cause notice under Rule 92(3) in Form GST RFD-08 and grant opportunity of hearing.
Statutory provision(s):
Section 54 of GST statutes, Rule 90(3) of GST Rules, Rule 92(3) of GST Rules
L.S. Pacific Wood Tech Pvt. Ltd. v. Commercial Tax Officer, (Madras) : Law Finder Doc Id # 2992837
