Facts of the Case

The petitioner, National Internet Exchange of India (NIXI), a non-profit company registered under GSTIN 07AABCN9308A1ZT engaged in export of internet services and management of the .IN domain registry, filed a refund claim of Rs. 51,28,263 towards IGST paid on zero-rated supplies for October 2017, on 17.10.2019 — within the two-year limitation under Section 54(1) of the CGST Act. The application was met with successive deficiency memos dated 21.10.2019, 11.11.2019 and 14.09.2020, each time requiring a fresh application after rectifying pointed-out defects, with the petitioner re-filing on 31.10.2019, 20.02.2020 and finally 02.11.2020. A show cause notice dated 02.03.2021 proposed rejecting the claim as time-barred, and the impugned order dated 13.04.2021 rejected the refund by applying paragraph 12 of Circular No. 125/44/2019-GST, treating each re-filed application (post-deficiency memo) as a fresh application for limitation purposes.

Issues Involved

  1. Whether a refund application accompanied by the documents prescribed under Rule 89(2) of the CGST Rules can be treated as non est for limitation purposes merely because a deficiency memo under Rule 90(3) later sought further clarifications.
  2. Whether paragraph 12 of Circular No. 125/44/2019-GST, requiring a fresh application (and fresh limitation reckoning) after every deficiency memo, is consistent with Section 54 of the CGST Act.

Petitioner's Arguments

  • The first refund application, filed on 17.10.2019, was well within the two-year limitation; subsequent re-filings were merely to clarify deficiencies/queries raised by the officer and could not be treated as fresh applications for computing limitation.
  • Rule 90(3) and paragraph 12 of the impugned Circular, to the extent they treated a deficiency-triggered re-filing as a fresh application restarting limitation, were unconstitutional and ultra vires Section 54 of the CGST Act; reliance was placed on the Delhi High Court's own earlier ruling in Bharat Sanchal Nigam Limited v. Union of India.

Respondent's Arguments

  • In terms of paragraph 10 of Circular No. 125/44/2019-GST, once a deficiency memo was issued, the earlier application ceased to be processed and a fresh application was required to be filed, which, per paragraph 12, also had to be within the two-year limitation period; since the final re-filed application was beyond two years, the claim was rightly rejected.

Court Order / Findings

  • Examining Section 54 and Rules 89 and 90 of the CGST Rules, the Court held that once an application is complete in terms of Rule 89(2), (3) and (4), it must necessarily be accepted, and deficiencies contemplated under Rule 90(3) are those rendering an application incomplete under Rule 89 — not merely calling for further clarification or additional documents that the officer considers necessary.
  • The Court held, following its earlier decision in Bharat Sanchal Nigam Ltd. v. Union of India, that an application accompanied by the documentary evidence prescribed under Rule 89(2) stops the limitation clock on the date of its filing, and cannot be treated as non est for limitation purposes merely because further clarification was sought by way of a deficiency memo.
  • Since the petitioner's application dated 31.10.2019 was complete in the prescribed form and manner, the impugned order rejecting the refund as time-barred was set aside, and the refund claim was restored for fresh consideration on merits by the proper officer, without it being necessary to rule on the broader vires challenge, which the petitioner did not press further.

Important Clarification

An application for GST refund that is accompanied by the documentary evidence prescribed under Rule 89(2) of the CGST Rules is complete for limitation purposes and stops the two-year clock under Section 54(1) on the date of its filing; a subsequent deficiency memo under Rule 90(3) seeking further clarification or additional material does not render the original (or duly re-filed) application non est, and a Circular cannot be read to defeat this statutory limitation scheme.

Sections Involved

  • Section 54, CGST Act, 2017 — prescribes the two-year limitation and procedure for claiming refund of tax.
  • Rule 89, CGST Rules, 2017 — prescribes the form, manner and documentary evidence for a refund application.
  • Rule 90, CGST Rules, 2017 — governs acknowledgment of refund applications and communication of deficiencies.

Decision – In Favour of

In favour of the Assessee — the rejection of the refund claim on limitation was set aside and the claim restored for fresh consideration on merits.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case Number: W.P.(C) 871/2022
  • CNR / Citation: W.P.(C) 871/2022
  • Coram: Hon'ble Mr. Justice Vibhu Bakhru & Hon'ble Mr. Justice Amit Mahajan
  • Date of Order: 9 August 2023

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