Refund Rejection Without Reason Under Budgetary Support Scheme Is Invalid

Rejection of a Partial Refund under the Budgetary Support Scheme without Reasons Is Invalid in Law

In this blog, we simplify this complex legal topic and explain why such refund rejections are unlawful, especially for taxpayers operating in eligible areas.

What Happened?

In various cases across India, refund applications filed under the Budgetary Support Scheme (BSS)—especially by industrial units in North Eastern and Himalayan states—have been partially rejected without any reasoning or speaking order. This practice has drawn legal scrutiny.

What is the Budgetary Support Scheme (BSS)?

• The BSS was introduced via DIPP Notification No. 10(1)/2017-DBA.II/NER dated 05.10.2017.
• It offers partial budgetary support (refund) for Central tax paid through cash ledger under the GST regime.
• It replaced earlier excise-based incentive schemes under the erstwhile tax regime (Area-based exemptions).

Why Is Rejection Without Reasons Legally Invalid?

1. Violation of Natural Justice
   • The principles of natural justice mandate that every quasi-judicial decision must record reasons, especially when the decision is adverse to the taxpayer.
   • SC in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan (2010) 9 SCC 496 ruled that “reasoned orders are the heartbeat of every judicial/quasi-judicial process.”
2. Contrary to GST Legal Framework
   • As per Section 54 of CGST Act, 2017, any rejection of refund (fully or partially) must be through a speaking order.
   • The applicant must be heard (via SCN and reply) before any rejection, and the officer must clearly cite the reasons.
3. No Arbitrary Discretion
   • Courts have held that arbitrary denial without justification is an abuse of power under Article 14 of the Constitution.
   • Refund under BSS is not a concession but a statutory and policy-driven entitlement, as upheld in Hero Motocorp Ltd. v. UOI (2021) by Delhi HC.

Recent Case Laws Supporting This

• Tata Steel BSL Ltd. v. UOI (2023) – Delhi High Court quashed refund rejections under BSS where no reasoning was provided.
• Star Paper Mills Ltd. v. CCE (2021) – Allahabad HC: Non-speaking order rejecting refund is unsustainable.
• Manohar Lal Sharma v. Union of India (2014) – Supreme Court reinforced that reasons ensure fairness, transparency, and accountability.

Practical Takeaway for Taxpayers

• Always demand a reasoned order for any refund rejection.
• File an appeal or writ petition if refund is rejected arbitrarily.
• Maintain evidence of eligibility under BSS, including production data, GST paid through cash ledger, and location in eligible states.

Summary

Refund rejections under the Budgetary Support Scheme without assigning reasons are invalid. As per law, GST authorities must issue a speaking order with justification. Courts have struck down arbitrary denials.

FAQs

Q1. Can GST refunds under Budgetary Support be rejected without reason?
No. Any rejection must be accompanied by clear reasoning, as per legal norms and constitutional principles.

Q2. What can I do if my refund is denied without explanation?
You can file a representation or appeal. If unresolved, a writ petition under Article 226 is also an option.

Q3. Where can I find the scheme guidelines?
You can refer to the official notification on the DPIIT website (external link).

Final Note

Don’t let unfair refund rejections go unchallenged. At Efiletax, we help businesses file refund claims, appeal rejections, and ensure due compliance under GST and government schemes.

Table