Facts of the Case

The petitioner, M/s Supernova Engineers Limited, is engaged in the manufacture and supply of diesel generator (DG) sets and is registered under the Goods and Services Tax (GST) laws. During February 2018, the petitioner supplied DG sets and panels to a unit located in a Special Economic Zone (SEZ). Since supplies made to SEZ units are treated as zero-rated supplies under Section 16 of the Integrated Goods and Services Tax Act, 2017 (IGST Act), the petitioner became entitled to claim a refund of the unutilised Input Tax Credit (ITC) under Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act).

The refund application was filed on 02.05.2020. However, the GST authorities rejected the claim on the ground that it was barred by limitation. The appellate authority upheld the rejection, leading the petitioner to approach the Gujarat High Court under Article 226 of the Constitution of India. (Mytaxexpert)

Issues Involved

  1. Whether the petitioner's refund application under Section 54 of the CGST Act was barred by limitation.
  2. Whether the COVID-19 relaxation notifications issued by the Central Government extending the limitation period were applicable to GST refund applications.
  3. Whether the refund claim deserved reconsideration in light of the subsequent notification excluding the COVID-19 period from limitation computation. (Mytaxexpert)

Petitioner’s Arguments

  • The petitioner contended that supplies made to an SEZ unit constituted zero-rated supplies, making it eligible for refund of accumulated ITC under Section 54(3) of the CGST Act.
  • It was argued that the limitation period stood extended due to the COVID-19 pandemic by virtue of the Government notifications.
  • The petitioner further relied upon Notification No. 13/2022-Central Tax dated 05.07.2022, which excluded the period from 01.03.2020 to 28.02.2022 for computing limitation under Section 54.
  • Therefore, the refund application filed on 02.05.2020 could not be treated as time-barred. (Mytaxexpert)

Respondent’s Arguments

  • The Department argued that the refund application had been filed beyond the statutory period prescribed under Section 54 of the CGST Act.
  • It was submitted that although opportunities were provided to the petitioner to produce documents supporting its claim regarding limitation, the petitioner neither submitted sufficient evidence nor appeared during the personal hearing.
  • Consequently, the appellate authority justified the rejection of the refund claim as time-barred. (Mytaxexpert)

Court Order / Findings

The Gujarat High Court observed that during the pendency of the writ petition, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 13/2022-Central Tax dated 05.07.2022, which specifically directed that the period from 01.03.2020 to 28.02.2022 shall be excluded while computing the limitation period for filing refund applications under Sections 54 and 55 of the CGST Act.

The Court held that:

  • The petitioner's refund application filed on 02.05.2020 was entitled to the benefit of the exclusion provided under the notification.
  • The rejection of the refund claim solely on the ground of limitation could not survive after issuance of the notification.
  • The competent authority was directed to reconsider the refund claim afresh by applying the amended legal position and pass a fresh order in accordance with law.

Accordingly, the writ petition was disposed of with directions for reconsideration of the refund application. (Mytaxexpert)

Important Clarification

  • The COVID-19 exclusion period under Notification No. 13/2022-Central Tax dated 05.07.2022 applies while computing limitation for GST refund applications under Section 54.
  • Refund claims rejected solely on limitation grounds may require reconsideration where the exclusion period becomes applicable.
  • Authorities are required to apply subsequent beneficial notifications while deciding pending or disputed refund matters.
  • Zero-rated suppliers to SEZ units remain eligible to seek refund of accumulated ITC subject to statutory conditions. (Mytaxexpert)

Sections Involved

  • Article 226 of the Constitution of India
  • Section 54 of the Central Goods and Services Tax Act, 2017
  • Section 54(3) of the CGST Act, 2017
  • Section 16 of the Integrated Goods and Services Tax Act, 2017
  • Rule 92 of the CGST Rules, 2017
  • Notification No. 13/2022-Central Tax dated 05.07.2022
  • Notification No. 35/2020-Central Tax dated 03.04.2020

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785408909_2430compressed.pdf

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