Story So Far!

Right from operationalization of refund module either sanctioning refunds through Manual process as per circular 17/17/2017 in early GST days or
sanctioning the refund processed online as per circular 125/44/2019, majorly two kinds of RFD-06 were issued by the GST Department:

• Refund order rejecting the refund amount wholly or partially: Before issuing the said order, the normal process of issuance of RFD-
08 followed by personal hearing and reply to SCN after which the final order is passed stating the ground or Rationale in writing for
REJECTION of refund amount rejected.

• Refund order sanctioned in FULL: In my experience till date all the Refund orders sanctioned in FULL is issued in Form-RFD-06 ONLY
mentioning the balance 10% amount of (90% already sanctioned through RFD-04) refund to be received by the Taxpayer WITHOUT
providing basis or Rationale of sanctioning the refund claim which is against the principal of NATURAL JUSTICE. i.e. Most of the refund
sanction orders issued is without NON-Speaking order.

• The Common error we use to get when we opt for downloading another PDF file along with RFD-06 which all of you will vouch is “Request
Document Not Found” / “The requested URL was Rejected”/”PDF not uploaded”

• Speaking order is a RARE commodity these days. Most of the orders are dumb and the submissions during the personal hearing fall on deaf
ears. Finally, the show cause notices are confirmed blindly resulting in senseless orders.

• The first few pages of the adjudication order, you find the show cause notice repeated, the next few pages contain the submissions in reply filed
and finally the order confirming the allegation without any discussion of the points raised in reply.

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Instructions issued for Department to issue “SPEAKING ORDERS” -1/2

Finally, Higher GST authorities have realized that most of the sanction orders issued by field officers are not supported with proper
Speaking order at the time of sanctioning the refund claim for which they have issued detailed Instruction No: 03/2022-GST dated
14.06.2022 providing guidelines for issuance of SPEAKING ORDER for following refund applications prospectively:

• Refund of ITC on account of Zero-rated supplies.

• Refund of ITC on account of Inverted Duty structure.

• Refund of IGST paid on account of Zero-rated supplies.

• Refund on account of Deemed Exports (Both Recipient/Supplier) point of view.

• Refund of Excess Cash Ledger.

• Refund filed under Other categories.

In addition to above certain general guidelines have been provided for all the refund categories specified in S.NO (3) a to l of circular
125/44/2019-GST which has been summarized in ensuing slides.

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 What is Meant by Speaking orders
The main principles of natural justice are:
• No man shall be a judge in his own case.
• Hear the other side.
• The party must be made known the reasons for the decision

Though there is no specific law in India for Speaking order Courts have made speaking order Mandatory to order passed by
Quasi-Judicial body, judicial authorities under any law which speaks for itself!

The order should stand the test of legality, fairness, and reason at all the higher appellate forums. That is, the Speaking order
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should contain all the details of the issue, clear findings and reasons.

Speaking orders are necessary if judicial review is to be effective. One basis of this requirement is to exclude or minimize
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arbitrariness. If reason is absent, the appellant forum is in the dark. Speaking orders are orders, which tell their own story

The adjudicating and appellate authorities are required to pass fair, judicious and legally sustainable Speaking orders which can
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withstand judicial scrutiny at higher appellate fora.

In a recent case, Rajnandini Metal Ltd Vs Union of India and Others - 2022-TIOL-810-HC-P&H-GST, the High Court observed, It is trite law that a
speaking order has to be self sustainable and respondents at this stage cannot be allowed to justify the same by adding reasons to it by filing additional
affidavit.

Considering the damage already made by Non-speaking orders, CBIC has issued detailed guidelines to be followed by GST
Authorities at the time of issuance of refund sanction/rejection order to provide Speaking order for the same.

Source: TIOL Orders Speak –Loud and Clear by Vijay Kumar 4

Important Guidelines to officers while issuing Speaking orders
Particulars Author’s Comments

Whether it has been checked that •
refund claim for the same period has
NOT been filed in the same category
including any claim under “Any •
other” Category?
Details of Deficiency Memo issued in •
respect of the refund claim and
subsequent refund application filed is
within the time period for filing •
refund application?
The GSTN refund functionality doesn’t allow refund to re-filed for the same period in the same category
of Refund application. It automatically restricts the taxpayer from filing for the same period.
However due to certain errors in Returns reporting, certain refunds are filed under Other categories for
which the field authorities are requested to verify/check the same before passing sanction order.
In many cases earlier department has violated the sequence and has issued SCN on non availability of
certain documents or noted deficiencies.
The Intervening period from the date of filing refund application to date of issuance of DM is NOT
Counted for limitation period of 2 years as per section 54(1) for refund applications filed on or after
18.05.2021(Nt-15/2021- CT dated 18.05.2021)

Whether Refund application has been • The Speaking order should capture clearly that refund application filed by the taxpayer is within the
filed within the Limitation period as limitation period of filing the refund application under CGST Act read with CGST rules.2017.
per CSGT Act read with CGST
Rules,2017? • The field officers should also capture in the speaking order for rationale of accepting/Not accepting the
refund applications filed by various Taxpayers based on the following extensions granted:

o Through Notifications for specific Intervening period during COVID

o Supreme court Suo-motto instructions for calculation of period of limitation.

• There are plenty of cases allowing refund applications to be considered for the purpose of calculating the
extended time limit as per SC order but mostly department are following circular no 157/13/2021
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Important Guidelines to officers while issuing Speaking orders- 2/2
Particulars Author’s Comments

Adjustment of amount due in accordance • Many Taxpayers who has filed returns belatedly has not paid Interest as per CGST Act,2017 and in any other circumstances
with section 54(10) of CGST Act wherever tax is due from taxpayer can also be ADJUSTED from refund amount to be sanctioned in accordance with sub
clause(b) of section 54 of CGST Act, 2017.

• If the officer is proposing to adjust the same from refund amount to be sanctioned, the same should be part of the Speaking
refund sanction order issued along with RFD-06.

Details in respect of SCN proceedings • The Speaking order should clearly mention all the details in respect of adjudication proceedings by way of issuance of SCN.

• More particularly the GST authorities should rely on the case laws and grounds submitted by Taxpayers against alleged
ground and justification/rational of accepting or not accepting the grounds specified by Taxpayers should be clearly
specified in the speaking order.

Justification about non-applicability of • Normally the concept of Un-just enrichment is applicable for refund application for excess payment of Tax wherein the
Unjust-enrichment refund application is file for Excess payment of Tax or refund under section 77 wherein it must be substantiated by
Taxpayers that Incidence of amount for which refund has been claimed has NOT been passed to any other Person

• The Speaking order should clearly specify as to how the Taxpayer has ensured that he is not unjustly enriched after which
refund application can sanctioned or rejected.

• The following documents are normally required to be verified by field officers to satisfy concept of unjust enrichment:
❑ Chartered Account certificate that incidence is not passed if refund amount exceeds 2.5 Lakhs
❑ Self declaration if Refund amount doesn’t exceed 2.5 Lakhs
❑ Balance sheet if the amount of refund is accounted as receivables
❑ Declaration from the recipient if the Excess tax charged to them is reversed in their returns.
❑ Any other furnished by taxpayer to justify that incidence of refund is not passed to any other person.
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 Additional details in respect of specific refund applications
Refund of ITC on account of Zero-rated
Supplies
• The amount claimed is DEBITED in ECL
• IGST amount claimed as refund is paid
through GSTR-3B
• The particulars of formula wherever
applicable is computed in line with GST
law
• Eligibility of ITC is verified for calculation
of NET ITC
• NET ITC doesn’t include Capital Goods
• The ITC is restricted to ITC available in
GSTR-2A/2B of the taxpayer
• Refund for export of goods is verified
through ICEGATE portal in respect of
shipping bills
• E-BRC/FIRC are available for Service
exports refund application
Refund of ITC on account of Inverted
Duty Structure
• Eligibility of supply to qualify for Inverted
duty structure
• Net ITC is calculated excluding Services
and Capital Goods for IDS refund
applications.
• The particulars provided in formula by
taxpayer is in line with law and wherever it
is not agreed by officer, same shall be part
of the speaking order.
Refund under Other category
• The speaking order should specify the legal
rationale of the refund application filed by
Taxpayer in other category supported with
circular reference if any.
• The refund amount is Debited through
DRC-03 Challan wherever applicable to be
verified
Refund for Supplies made by DTA to
SEZ
• The Services provided by DTA to SEZ
qualifies for “Authorized operations” as
per SEZ Act.
• The Goods or Services are endorsed by
Authorized/Specified officer for the
purpose of claiming refund.
• The payment is received by DTA from SEZ
for supply of services.
Refund for Supplies made by DTA to
SEZ
Facility to upload PDF is already available in
ACES-GST Portal for officer to upload the
Speaking order along with sanction order
which shall be used by officer which shall be
provided to Taxpayer, Post-Audit/
Reviewing authorities.
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Post Audit & Review

Procedure relating to Sanction and Pre and Post audit of refund/rebate claims under Erstwhile regime

Refund up to 50K, No OIO is

Refund claims involving an
amount of INR 5 Lakhs or
above shall be subject to
mandatory PRE-AUDIT
Refund claims from 50k to 5L ,
required to be passed but these
OIO shall be passed, and the O-
orders shall be subject to post
I-O shall be subject to POST-
audit (25% of case on
Audit by level AC/JC(Audit)
random basis)

Procedure relating to Sanction and Pre and Post audit of refund/rebate claims under GST Regime
As per Circular 17/17/2017-
POST AUDIT under GST may It can be inferred that Refund
GST it has been held that
be conducted henceforth for amount less than 1 Lakh will
PRE-AUDIT of refund orders
refund claims amounting to not be subjected to Post-Audit
is NOT required to be carried
INR 1 Lakh or more after the same is sanctioned
out under GST

The sanctioned refund orders are currently being REVIEWED for examination of LEGALITY and PROREITY of the refund
order for taking a view whether Appeal to appellate authority is required to be filled by the Department or not
Process for REVIEW & REFUND Claims
Issuance of Refund order
in form RFD-06
The entire process of
review of REFUND ORDER
shall be completed at least
30 days before expiry of
time period for allowing
Appeal
After Post-Audit and
Review the Department
will decide if Appeal is
required to be filled
against the refund order
or not
Online Transmission on
Post Audit Cell under
ACES-GST of refund order
supervision of DC/AC shall
more than 1 Lakh to
be created in Comm. Head
Review & Post audit
quarters
officers
The Findings of Post-Audit
shall be communicated to Conclusion of Post-Audit
within 3 months from the
REVIEW Branch within 3
months date of issuance of GST-
RFD-06 orders
Currently the Online process is not developed in ACES- GST Portal for which it has
been proposed to conduct the same in Offline mode through E-office and the RFD-
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06 issued shall be transferred to Post-audit cell within 7 days from issuance of final
refund order
Key Points for Consideration

• Review of all the refund orders sanctioned and bifurcate those orders for which the time limit for filing appeal under section 107 under CGST
Act, 2017 has been elapsed.

• Refund applications particularly filed under “Other categories” are required to be scrutinized and transferred to Post Audit cell immediately
before expiry of the time period.

• The Taxpayers are advised to ensure that all documentation in respect of the refund order is archived as the same shall be called upon at the time
of Post-Audit reviews by GST Department authorities.

• The Functionality in ACES portal must be immediately implemented for smooth flow of Review and post Audit by GST authorities.

• Taxpayers are requested to do MOCK-Audit internally by them to voluntarily pay the refund erroneously sanctioned to them by GST
authorities to avoid penal consequences if the same is identified by GST authorities at the time of Post-Audit and Review.

• The impact of various Supreme court & High court judgments like VKC Foot ware disallowing Input services should be looked in to by taxpayers
for the refund applications already sanctioned by authorities earlier.

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 Thank you
Hope this presentation has
enriched your knowledge on
Instructions issued for Speaking
order & Post-Audit for refund
orders
Reach out!

For clarification of any issues

connect@
CA Shravan Gehlot
M: 9500144702
E: Shravan@saaasllp.com
L: Shravan Gehlot

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