Facts of the Case

M/s Gajraj Vahan Private Limited had, admittedly, made payment of GST under the wrong tax head, a scenario governed by Section 77 of the CGST Act, 2017. The petitioner's application for refund of excess tax paid for the period August 2017 to March 2018 was rejected by order dated 23.4.2020 on the ground that it was barred by the law of limitation prescribed under Section 54 of the CGST Act, even though the petitioner's case was that Section 77, governing refund of tax paid under a wrong head, prescribes no period of limitation at all.

Issues Involved

  1. Whether the general limitation period under Section 54 of the CGST Act applies to a refund claim arising from payment of tax under the wrong head, which is separately governed by Section 77.

Petitioner's Arguments

  • The refund application was for tax inadvertently paid under the wrong head, a situation squarely governed by Section 77, which prescribes no limitation period for filing such refund claims, unlike Section 54.
  • Rejecting the refund application by applying the Section 54 limitation was illegal and contrary to the scheme of the GST Act.

Respondent's Arguments

  • The rejection order proceeded on the basis that the refund claim was time-barred under Section 54 of the CGST Act; there was no dispute that the payment had in fact been made under the wrong head.

Court Order / Findings

  • The Court noted that Circular No.162/18/2021-GST dated 25.9.2021, issued by CBIC, clarified refund of tax specified in Section 77(1) of the CGST Act and Section 19(1) of the IGST Act, and that Sub-Rule (1A) had been inserted into Rule 89 of the CGST Rules by Notification No.35/2021-Central Tax, allowing a person to claim refund under Section 77 within two years of payment of tax on the correctly identified supply, with a further window for past wrong-head payments.
  • The CBIC's benevolent extension of limitation for refund of tax paid under a wrong head, inserted via Rule 89(1A), applies even to refund claims that predate the notification, giving taxpayers a fresh two-year window from the date the sub-rule came into force; a refund claim under Section 77 cannot be mechanically rejected by applying the Section 54 limitation period.
  • The Court allowed the petition, quashed the rejection order (Annexure-7), and granted liberty to the petitioner to file a fresh refund application within thirty days, to be considered in light of the CBIC Circular within a further thirty days.

Important Clarification

  • Refund of GST paid under the wrong tax head (e.g., CGST/SGST instead of IGST or vice versa) is governed by Section 77 of the CGST Act, not the general Section 54 limitation; taxpayers denied such refund on limitation grounds can rely on CBIC Circular No.162/18/2021-GST and Rule 89(1A) of the CGST Rules, which allow a fresh window to file such claims.

Sections Involved

  • Section 77, CGST Act, 2017 - tax wrongfully collected and paid to Central or State Government, refund without the standard limitation.
  • Section 54, CGST Act, 2017 - general refund provisions with limitation period.
  • Rule 89(1A), CGST Rules, 2017 - procedure and extended timeline for refund under Section 77.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the rejection order quashed and liberty granted to file a fresh refund application.

Case Details

Court: High Court of Jharkhand at Ranchi
Case No.: W.P.(T) No. 1801 of 2021
Coram: Chief Justice Sanjaya Kumar Mishra and Justice Ananda Sen
Date of Order: 10.05.2023

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