Facts of the Case

M/s Durgambika Traders, a proprietary concern, filed three successive refund applications on 26 February 2023, 3 May 2023 and 29 November 2023, but the department repeatedly issued deficiency notes in Form GST RFD-03 under Rule 90(3) of the CGST Rules, 2017 — dated 18 May 2023, 5 July 2023 and 14 December 2023 — without ever substantively considering or deciding the refund claim. The petitioner approached the Karnataka High Court, offering to file a fresh, complete refund application, but seeking that it be treated as relating back to the date of the first application (3 May 2023 or, per the petitioner's submission, 03.05.2023) for purposes of limitation under Section 54 of the CGST Act, along with a claim for interest.

Issues Involved

  1. Whether a taxpayer subjected to repeated deficiency memos under Rule 90(3), without a substantive decision on the underlying refund claim, is entitled to have a fresh refund application treated as relating back to the date of the original application for limitation purposes.
  2. What directions are appropriate to ensure the refund claim, including the interest component, is finally decided within a defined timeframe.

Petitioner's Arguments

  • Despite three refund applications being filed with supporting material, the department merely kept issuing deficiency memos without considering the substance of the refund claim.
  • A fresh, complete refund application should be treated as having been filed on the date of the first application (03.05.2023), excluding the intervening period, so that the taxpayer is not prejudiced on limitation by the department's own repeated deficiency memos.
  • The refund claim, once decided, should also carry the interest claimed by the petitioner under the statutory scheme.

Respondent's Arguments

  • The department's counsel, on instructions, did not oppose the relief and agreed that if the petitioner filed a fresh refund application with supporting documents, it would be considered without reference to limitation, treating it as filed on 03.05.2023, and an appropriate decision taken including on the interest claim.

Court Order / Findings

  • Given the consensus reached between the parties, the Court disposed of the petition by issuing specific directions rather than adjudicating a contested point of law.
  • It directed that the petitioner be granted liberty to file a fresh refund application within six weeks, and that this fresh application be construed as having been filed on 03.05.2023 — the date of the first refund application — excluding the intervening period for limitation purposes under Section 54 of the CGST Act.
  • The concerned respondent was directed to issue an acknowledgment in Form GST RFD-02 immediately upon filing, and to pass appropriate orders on the refund claim, together with the interest claimed, within three months, in accordance with Section 54 read with Rule 89 of the CGST Rules, with all other rival contentions (barring limitation) and remedies expressly kept open.

Important Clarification

  • Where a taxpayer's refund claim is stalled through a series of deficiency memos under Rule 90(3) rather than being substantively decided, courts can direct that a fresh, complete application be treated as relating back to the date of the original filing for limitation purposes under Section 54 — preventing the department's own procedural churn from time-barring a genuine claim.
  • Such relief typically comes bundled with a firm timeline (here, three months) for the refund authority to decide the claim, including any interest component, once the corrected application is filed.

Sections Involved

  • Section 54, CGST Act, 2017 – prescribes the time limit and procedure for claiming refund of tax, including interest on delayed refunds.
  • Rule 89, CGST Rules, 2017 – lays down the application procedure for refund claims.
  • Rule 90(3), CGST Rules, 2017 – governs issuance of a deficiency memo (Form GST RFD-03) where a refund application is found incomplete.

Decision – In Favour of

The decision is in favour of the assessee, with the department directed to treat a fresh refund application as relating back to the original filing date and to decide the claim, including interest, within three months.

Case Details

Court: High Court of Karnataka at Bengaluru. Case No.: Writ Petition No. 5131 of 2024 (T-RES). Coram: Hon'ble Mr. Justice S.R. Krishna Kumar. Date of Order: 14 November 2025.

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