Analysis of Hon’ble Gujarat High Court decision in the case of Arcelor Mittal Nippon Steel Ltd. vs. Asstt. Commissioner-2021-TIOL-2259-HC-AHM-GST

Dear Readers,

Given below is the gist of a recent judicial ruling on the various issues arising under the GST Laws: 

1.   Arcelor Mittal Nippon Steel Ltd. vs. Asstt. Commissioner

      -2021-TIOL-2259-HC-AHM-GST                                          [Date of Decision:  24.11.2021]

Issue involved:

Whether the rejection of refund claim is legal and valid when the show cause notice is vague and lacks the fundamental details?

Factual matrix:

The petitioner, an integrated steel manufacturer/exporter of iron and steel products, filed two separate Applications for refund of unutilized compensation cess under S.54 of the CGST Act, 2017 read with S.16 of the IGST Act, 2017 read with Rule 89 of the CGST Rules, 2017 with accompanied documents as prescribed.

Petitioner was, however, served with two show cause notices dated 04.03.2020 and 11.03.2020 issued under Rule 92(3) of the CGST Rules, 2017, proposing the rejection of the refund claims on the ground ‘other’ and seeking the response of the petitioner within 15 days.  Petitioner filed its reply and raised various contentions. However, vide adjudication orders dated 23.03.2020, the claims were rejected without assigning any reasons and without granting any hearing to the petitioner by the adjudicating authority.  

Being aggrieved, petitioner approached the Hon’ble High Court seeking appropriate reliefs.


After hearing both the sides extensively, the Hon’ble Court allowed the petition and quashed the impugned orders vide which the refund applications were rejected.  The Hon’ble Court has made some strict and pertinent observations in this case and also refrained from imposing any cost on the officer taking into account the fact that the officer was a fresher as pleaded by the Ld. Senior Standing Counsel for the Respondent. The relevant observations of the Hon’ble Court on the importance of show cause notice and what it should contain are reproduced below:

“7.2.   As rightly pointed out by the petitioners, the only ground assigned for proposing the rejection of the claim for refund is the “others” with a remark that “error in adjusted total turnover.” It is surely and rightly has been termed as a show cause notice which is completely vague and lacks the fundamental details which otherwise is required to be given for anyone to comprehend the same. A notice since is a foundation of any proceedings and if the same is not clear and is vague, the very edifice is extremely weak and based on such hollow foundation, when an attempt is made to raise a superstructure, the same cannot be sustained.

7.3.    In the affidavit-in-reply filed by the senior officer, he was unable to defend the show cause notice which is not capable of any kind of defence. Availing of any opportunity in terms of filing of the reply or of personal hearing also would not serve any purpose when the very show cause notice has no foundational facts contained in it. The respondents has issued the said notice for the purpose of rejecting the refund claim. The reply to the show cause notices given by the petitioners also clearly and emphatically pointed out to the authority that the show cause notices given are wholly and essentially lack any reason since it simply mentions the reason as “other” without elaborating or specifying the grounds on which the proposal to reject the refund the amount is made. The column of remark as mentioned refers only as “error in adjusted total turnover.” Not only the petitioner but anyone would be clueless as to what error the officer is attempting to point out. Hence, the request was rightly made to furnish the details of error in adjusting turnover for verifying and filing the suitable reply.

7.4.    Petitioner quite rightly further clarified that in absence of proper reasons in the show cause notices, neither it would be in a position to file any reply nor appear in person for hearing. This has been the reply to both the show cause notices. We can surely appreciate that the replies shall naturally be of the grounds, factual as well as legal, as may be incorporated in the notice itself.

7.5.    Instead of making any attempt to correct the error of giving the notice with reasons, the authority concerned / the respondent had chosen to pass the orders of rejection which are under challenge before this Court. The orders which have been passed on 23.03.2020 simply says “I hereby reject the amount of INR 0 to M/s. ARCELORMITTAL NIPPON STEEL INDIA LIMITED having GSTIN 24AAACE1741P1ZN under sub-section () of section ) of the Act/under section – of the Act.” The remark column says “Value of steel supply not included in the total adjusted turnover.”

7.6.    Not only the show cause notice lacks the clarity and requisite material necessary to meet with the same, the order impugned is also in clear violation of the settled cannon of law. Lack of reasons in the show cause notices has not enabled the parties to make an effective representation and file the reply nor would the grant of personal hearing for contesting such show cause notices would sub-serve the purpose. The order of rejection also is a non-speaking order and the same had been passed without bearing in mind requirements of giving any reasons for rejection.”

Lastly, the Hon’ble Court directed as under:

“9.      While parting, we deem it appropriate to direct this order to be placed before the senior most officer for him to recognize that there is a need for the in-house training for discharging the quasi-judicial functions. Unless, this aspect is taken seriously, it would entail the serious consequences and also results into consuming the time and energy of all concerned.

10.     Though we were inclined to impose the cost in the circumstances discussed above, at the request of learned Senior Standing Counsel Mr. Priyank Lodha who has, on instructions, urged that the officer concerned is a fresher, we have resisted ourselves from so doing with the directions above.”

Decision: Writ petition allowed.


Legal Laugh:

“ATTORNEY: How was your first marriage terminated?

 WITNESS: By death…

 ATTORNEY: And by whose death was it terminated?

 WITNESS: Take a guess.”

Firm’s Name: SPS LEGAL Contact details • Office : 022 6912 9300 Ext: 308 Direct : 022 6912 9308 • Mobile : 98202 28799 • E.mail : Background: Shailesh has over 30 years’ experience in Consulting, Advisory and Litigation practice in the field of Indirect Tax Laws that include Central Excise, Service Tax, Customs, State VAT Laws, CST & GST. Shailesh is also one of the Partners in a legal firm, namely, M/s. RVS LEGAL having its base in Chennai, Bangalore and Mumbai. Mr. V. Raghuraman, Advocate, Bangalore and Mr. K. Vaitheeswaran, Advocate, Chennai are two other Partners in the firm. This boutique firm specialises in Indirect Taxation, Direct Tax, International Taxation, Arbitration, Corporate Laws (including IBC), Drafting/Vetting of Commercial Contracts, amongst other fields.
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