Facts of the Case

  • Corporate Profile & GST Registrations: The petitioner, M/s Axis Bank Limited, is a prominent private banking institution in India. Upon the introduction of the Goods and Services Tax (GST) regime, the bank transitioned from a centralized Service Tax registration to state-specific GST registrations, holding distinct GSTINs in Andhra Pradesh (AP) and Telangana (TL) to govern localized banking operations.
  • System Configuration Error: During initial system configuration at the advent of GST, several branch offices physically situated in Telangana were erroneously mapped to the Andhra Pradesh GST registration in the bank's source system.
  • Erroneous Tax Treatment & Payment: Due to this mapping error, the bank treated services provided by these Telangana branches as inter-State supplies originating from AP instead of intra-State supplies within Telangana. Consequently, Integrated Goods and Services Tax (IGST) was paid using the AP GST registration, although the Place of Supply (POS) was correctly identified as Telangana.
  • Self-Detection and Rectification: In 2019, upon detecting the error, the bank suo motu deposited the correct CGST and SGST liabilities in cash under its Telangana registration for all tax periods from July 2017 to August 2019, reporting the payments via FORM GST DRC-03. This resulted in double taxation on the same underlying transactions.
  • Refund Application & Summary Rejection: On February 14, 2020, the petitioner filed refund applications in Andhra Pradesh for the excess/wrongly paid IGST amounting to ₹16,90,41,709/-. The tax authority issued a Show Cause Notice dated April 8, 2020, proposing rejection on the grounds that the claim was time-barred under Section 54 of the CGST Act. Despite the petitioner's detailed reply dated April 16, 2020, the Assistant Commissioner rejected the refund applications.
  • Appellate Orders: The petitioner preferred appeals before the Additional Commissioner (GST-Appeals), who dismissed them via an Order dated November 23, 2020, sustaining the time-bar rejection. Due to the non-constitution of the GST Appellate Tribunal (GSTAT), the petitioner approached the High Court via Writ Petition.

Issues Involved

  1. Whether a refund application filed for tax wrongfully paid under the incorrect tax head (IGST instead of CGST + SGST) is governed strictly by the standard two-year limitation period prescribed under Section 54 of the CGST Act, 2017, or governed by Section 77 of the CGST Act / Section 19 of the IGST Act read with Rule 89(1A).
  2. Whether the phrase "subsequently held" in Section 77 of the CGST Act and Section 19 of the IGST Act applies only to adjudication/audit findings by tax officers or also encompasses self-discoveries of errors made by taxpayers.
  3. Whether CBIC Circular No. 162/18/2021-GST dated September 25, 2021, applies retroactively to refund claims rejected prior to its issuance.

Petitioner’s Arguments

  • Applicability of Circular No. 162/18/2021-GST: The learned counsel for the petitioner submitted that the tax administrative authorities erred in invoking Section 54 to reject the refund claims as time-barred. He contended that the issue is fully covered by CBIC Circular No. 162/18/2021-GST dated September 25, 2021.
  • Meaning of "Subsequently Held": Citing Paragraphs 3.1 and 3.2 of the Circular, the petitioner argued that "subsequently held" includes cases where the taxpayer self-detects an error in determining whether a transaction was inter-State or intra-State.
  • Fresh Period of Limitation under Rule 89(1A): Relying on Paragraph 4.2 of the Circular and Rule 89(1A) of the CGST Rules (inserted via Notification No. 35/2021-Central Tax), the petitioner submitted that where the correct tax was paid prior to September 24, 2021, taxpayers were granted a fresh period of two years from September 24, 2021 (i.e., until September 23, 2023) to file refund applications. Thus, the refund claim filed was well within time.

Respondent’s Arguments

  • Statutory Bar under Section 54: The learned Senior Standing Counsel for the Revenue argued that Section 54 of the CGST Act imposes a strict statutory limitation of two years from the relevant date for claiming any tax refund. Since the refund applications (filed in February 2020) covered tax periods starting from July 2017, the majority of the claims were time-barred.
  • Lack of Documentary Evidence: The Revenue contended that the petitioner failed to submit supporting documentary evidence, such as invoice details and branch-wise mapping records, to substantiate the claim that taxes paid in Andhra Pradesh actually belonged to Telangana branches.
  • Enforceability of Procedure: The Revenue asserted that entitlement to a refund is subject to procedural compliance under Section 54 and that the authorities acted in accordance with the law prevailing at the time of order issuance.

Court Findings & Order

  • Interpretation of Statutory Provisions & Circular: The High Court examined Section 77(1) of the CGST Act and Section 19(1) of the IGST Act, alongside CBIC Circular No. 162/18/2021-GST. The Court emphasized Paragraph 3.2 of the Circular, which clarifies that "subsequently held" covers both officer-adjudicated findings and self-discoveries by taxpayers.
  • Limitation Period Extended by Notification No. 35/2021-Central Tax: The Court noted that under Rule 89(1A) of the CGST Rules, if a taxpayer paid tax under the correct head prior to September 24, 2021, the two-year period for claiming a refund of the wrong tax paid runs from September 24, 2021 (extending the limitation up to September 23, 2023).
  • Inability of Lower Authorities to Consider Circular: The Court recognized that the impugned order was passed on November 23, 2020, whereas the clarifying CBIC Circular was issued later, on September 25, 2021. Consequently, the adjudicating authority had no opportunity to consider the beneficial provisions of the Circular.
  • Final Order: The High Court remanded the matter back to the Assistant Commissioner, Central Tax (Respondent No. 3) to reconsider the refund application afresh in light of CBIC Circular No. 162/18/2021-GST, including verification of supporting documents, and pass an order in accordance with law. The Writ Petition was disposed of without costs.

Important Clarifications

  • Self-Discovery of Wrongful Payment: Taxpayers who inadvertently pay IGST instead of CGST/SGST (or vice versa) due to improper identification of the Place of Supply or Location of Supplier can claim a full refund upon paying tax under the correct head. Formal adjudication by a tax officer is not a prerequisite.
  • Overriding Limitation Rule: Refunds for tax paid under the wrong head are governed by Section 77 of the CGST Act / Section 19 of the IGST Act read with Rule 89(1A), providing relief from standard Section 54 limitation calculations.
  • Binding Nature of CBIC Circulars: Clarificatory circulars that benefit taxpayers apply to pending proceedings and must be considered by tax authorities, even if issued after the original assessment orders.

Sections Involved

  • Section 77, CGST Act, 2017: Tax wrongfully collected and paid to Central Government or State Government.
  • Section 19, IGST Act, 2017: Tax wrongfully collected and paid to Central Government or State Government.
  • Section 54, CGST Act, 2017: Refund of tax.
  • Rule 89(1A), CGST Rules, 2017: Application for refund of tax wrongly paid under Section 77.
  • Section 168(1), CGST Act, 2017: Power to issue instructions or directions by the Board.

Link to download the order - https://mytaxexpert.co.in/uploads/1784626891_1866compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content.The material has been prepared with the assistance of AI tools.