Facts of the Case

M/s. Dolphin Inks Pvt. Ltd. filed refund applications under Section 54(1) of the CGST Act, 2017 in respect of the tax period relating to June 2019. The refund applications were submitted on 28 August 2021.

The Assistant Commissioner rejected the refund claims solely on the ground that they were filed beyond the prescribed limitation period of two years under Section 54(1). The appellate authority affirmed the rejection.

Aggrieved by the rejection, the petitioner approached the Bombay High Court by filing writ petitions challenging the appellate order.

Issues Involved

  1. Whether the period excluded by the Supreme Court during the COVID-19 pandemic applies to limitation prescribed under Section 54(1) of the CGST Act for GST refund applications.
  2. Whether the refund application filed on 28 August 2021 could be rejected as time-barred despite the Supreme Court's extension of limitation.
  3. Whether the authorities were justified in rejecting the refund claim solely on the ground of limitation.

Petitioner's Arguments

The petitioner contended that:

  • The refund applications were covered by the Supreme Court's orders extending limitation during the COVID-19 pandemic.
  • The period from 15 March 2020 to 2 October 2021 stood excluded while computing limitation.
  • Consequently, the refund applications were filed within the permissible period.
  • The departmental authorities failed to consider the binding effect of the Supreme Court's limitation orders.
  • Reliance was placed upon the Bombay High Court judgment in Saiher Supply Chain Consulting Pvt. Ltd. vs Union of India, wherein identical issues had already been decided.

Respondents' Arguments

The department maintained that:

  • Section 54(1) prescribes a mandatory limitation period of two years.
  • Since the refund application relating to June 2019 was filed on 28 August 2021, it was beyond the statutory limitation.
  • Therefore, the refund claim was rightly rejected as barred by limitation.

Court's Findings

The Bombay High Court observed that the controversy had already been settled in Saiher Supply Chain Consulting Pvt. Ltd. vs Union of India (2022 SCC Online Bom 67).

The Court held that:

  • The Supreme Court had expressly excluded the period from 15 March 2020 to 2 October 2021 while computing limitation.
  • The exclusion applied not only to ordinary proceedings but also to limitation prescribed under special statutes including Section 54(1) of the CGST Act.
  • The departmental authorities were bound to follow the Supreme Court's orders.
  • Therefore, the refund application could not have been rejected merely on the ground of limitation.
  • The impugned appellate order was contrary to the binding directions of the Supreme Court.

Accordingly, the rejection order was held to be unsustainable in law.

Court Order

The Bombay High Court:

  • Quashed and set aside the appellate order dated 28 October 2021.
  • Directed the Assistant Commissioner to process the refund application within four weeks.
  • Clarified that limitation shall not be treated as an issue.
  • Directed that if any other defects existed in the refund application, the department should intimate the petitioner within two weeks for rectification.
  • Clarified that the refund claim should thereafter be decided on its own merits.
  • Further clarified that the Court had expressed no opinion on the merits of the refund claim itself.

Important Clarification

The judgment reiterates that the Supreme Court's COVID-19 orders extending limitation are equally applicable to GST refund claims governed by Section 54 of the CGST Act.

Authorities cannot reject refund applications merely on limitation where the statutory period falls within the COVID exclusion period. The department must compute limitation after excluding the period directed by the Supreme Court.

The decision also reinforces the precedential value of Saiher Supply Chain Consulting Pvt. Ltd. vs Union of India, making it an important authority for GST refund limitation disputes.

Ratio Decidendi

Where the limitation period prescribed under Section 54(1) of the CGST Act overlaps with the period excluded by the Supreme Court during the COVID-19 pandemic, such excluded period must be ignored while computing limitation, and refund applications cannot be rejected solely as time-barred.

Sections Involved

  • Section 54(1) of the Central Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Circular No. 20/16/04/18-GST dated 18.11.2019
  • Supreme Court Orders extending limitation during COVID-19 (23.03.2020 & 23.09.2021)

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783941705_935compressed.pdf

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