Fact of the Case: The petitioner, M/s. L.S. Pacific Wood Tech Pvt. Ltd., had filed an application for refund under Section 54 of the applicable GST statutes in Form GST RFD-01 dated 18.08.2025. The Commercial Tax Officer subsequently issued a deficiency memo dated 16.04.2026 in Form GST RFD-03 under Rule 90(3), stating that the petitioner’s refund claim was time barred. The petitioner challenged this deficiency memo before the Madras High Court under Article 226 of the Constitution.

The litigation concerned whether limitation could legally be treated as a “deficiency” for issuance of RFD-03. The petitioner argued that Rule 90(3) applies to deficiencies capable of rectification, whereas if the authority proposes to reject a refund claim wholly or partly, it must follow Rule 92(3), issue the prescribed show-cause notice and provide an opportunity of hearing before rejection.

Held by court : The Madras High Court held that Rule 92(3) provides the appropriate procedure whenever the proper officer considers the whole or any part of the refund claim liable to be rejected. The provision requires issuance of notice in Form GST RFD-08, an opportunity to submit a reply in Form GST RFD-09 and consideration of such reply before an order sanctioning or rejecting the refund is passed in Form GST RFD-06.

The Court distinguished this procedure from Rule 90(3), which deals with deficiencies and requires a fresh refund application after rectification. It expressly held that a deficiency memo cannot be issued on the ground that the refund application is time barred. Consequently, no further action could be taken pursuant to the impugned deficiency memo, while liberty was granted to issue a show-cause notice under Rule 92(3) within two weeks if rejection was intended.

Fact of the Case: St. Josephs Hospital Trust approached the Kerala High Court challenging Ext.P1, a composite Show Cause Notice dated 26 August 2026 issued by the Joint Commissioner. The Show Cause Notice covered multiple financial years, namely FY 2020-21 to FY 2024-25. The petitioner questioned the legal sustainability of initiating proceedings for several financial years through a single composite notice.
The principal ground of challenge was that issuance of one composite notice covering multiple assessment years had already been held legally unsustainable by the Kerala High Court. The petitioner relied specifically upon the Division Bench decisions in Joint Commissioner (Intelligence & Enforcement) v. M/s. Lakshmi Mobiles Accessories [2025 KHC OnLine 149] and Tharayil Medicals (M/s.), Thrissur v. Deputy Commissioner, Thrissur [2025 KHC OnLine 467]. On this basis, the petitioner sought interference with and quashing of the composite Show Cause Notice.

Held by court : The Kerala High Court found merit in the petitioner’s contention. The Court observed that the issue concerning issuance of a composite notice for multiple assessment years had indeed been considered by the Division Bench in the decisions relied upon by the petitioner. In view of the principles laid down in those judgments, the Court held that interference with the impugned composite Show Cause Notice was required.
Accordingly, the High Court quashed Ext.P1 composite Show Cause Notice and granted liberty to the respondent to issue separate notices for the relevant assessment years. At the same time, the Court protected the Revenue on limitation by directing that the period from the date of Ext.P1 until receipt of the certified copy of the judgment would be excluded while computing limitation for initiating fresh proceedings. All other contentions of the parties were expressly left open.

The petitioner contended that the proceedings related to FY 2020-21, during the COVID-19 pandemic, resulting in delay in remitting tax through GSTR-3B. The Revenue submitted that a 10% penalty was imposed under Section 73(1) and interest under Section 50(1), and therefore there was no infirmity in the order. The litigation consequently centred on whether the penalty could be interfered with because the delayed payment occurred during the pandemic period.

Held by court : The Madras High Court observed that, except where tax and interest are paid within thirty days from the date of receipt of the show cause notice, the statute does not enable waiver of the penalty at 10% of the tax. Therefore, the petitioner’s reliance on the fact that the relevant assessment period fell during the COVID-19 pandemic did not provide a statutory basis for waiver of the penalty.

The Court noted that the penalty had been imposed at 10% of the tax demand of ₹7,14,322. It found no infirmity in the impugned order warranting interference. Accordingly, the writ petition was disposed of without any order as to costs, and the connected miscellaneous petition was closed. Thus, the Court did not interfere with the penalty imposed on the petitioner.