REFUND OF GST PAID ON EXEMPTED SERVICES

In M/s. Nspira Management Services Private Limited Versus Assistant/ Deputy Commissioner of Central Tax, Nellore, Union of India. - 2025 (10) TMI 107 - ANDHRA PRADESH HIGH COURT, the petitioner was engaged in management of educational institutions, educational consultancy.  The petitioner took residential dwellings on rent from the respective land owners to provide accommodation to its students.  The petitioner paid the rental charges which includes GST as per the invoices issues to the petitioner.  Later the petitioner came to know that GST is exempted in respect of rental charges payable on educational services vide Entry No. 12 of the Exemption Notification No. 12 of 2017-Central Tax (Rate) dated 28.06.2017 under Heading 9963 or 9972.

In view of the exemption as discussed above the petitioner filed a refund application for getting the refund of tax already paid by him on 01.05.2024, to the tune of Rs.11.49 crores for the period from July 2017 to January 2020.  Another refund application was filed by the petitioner for the period from February 2020 to June 2022.  The Department returned the refund application citing some defects in the refund applications on 21.05.2024.  In the said defect memo, it was informed that the application for refund filed by the petitioner could not be processed since the time limit of 2 years for filing refund application has expired.  Against this order the petitioner filed the present writ petition before the High Court. 

The petitioner contended the following before the High Court-

• The question of eligibility of refund cannot be decided by issuance of defect memos as the same requires adjudication in accordance with the procedure contemplated under law.
• The Department is to issue show cause notice in Form RFD-08 and allow the petitioner to file reply in Form RFD-09 and to pass a speaking order in Form RFD-06 as per the procedure contemplated under Rule 92 (3) of CGST Rules, 2017.
• In the absence of following the procedure under the said Rule, the impugned memos under challenge are liable to be interdicted by this Court.

The Department contended the following-

• Once a deficiency memo has been issued, the refund application would not be further processed.

• Section 54 of CGST Act, 2017 provides that an application claiming refund of any tax and interest has to be made within a period of two years from the relevant date in such form and manner as may be prescribed. 
• As per Notification No.13/2022-Central Taxes, dated 05.07.2022 the period from the 1st day of March, 2020 to 28th February, 2022 is excluded for computation period of limitation for filing refund application under Sections 54 or 55 of the Act. 
• The application for refund shall be submitted on or before 19.01.2024, but in the instant case the refund application was initially filed on 01.04.2024, which is beyond due date for filing refund claim.

Therefore, the Department prayed the High Court to dismiss the writ petition.  To these contentions, the petitioner submitted before the High Court that the delay caused in filing the application is not deliberate and the same had occurred due to technical and procedural hurdles. It is further contended by the petitioner that since the Department did not raise the ground of limitation in the first memo, the same ought not to have been raised in the subsequent memos.

The High Court considered the submissions of the petitioner and the Department.  The High Court observed that the petitioner paid tax on the rental charges levied by the landlords to its educational institutions, despite the same is exempted under the provisions of the GST Act.  Therefore, the petitioner filed refund application for the tax paid at all times for the exempted services.  The Department rejected the said application, through its defect memo, on the ground that the application for refund is time barred.

The High Court observed that any collection of tax shall be in accordance with Article 265 of the Constitution of India which postulates that no tax can be collected without authority of law. Though the petitioner is not liable to pay tax, the same was paid as per the invoices raised by the landlords and therefore it had filed application seeking to refund of the same which was rejected by the Department as time barred. 

The High Court analysed the provisions of Section 54 of the CGST Act.  The High Court also relied on a judgment of Gujarat High Court in M/s. Comsol Energy Private Limited Versus State Of Gujarat - 2021 (6) TMI 827 - GUJARAT HIGH COURTin which the High Court considered the applicability of Section 54 of the Act in regard to limitation. 

In BINANI CEMENT LTD. Versus UNION OF INDIA - 2013 (6) TMI 417 - GUJARAT HIGH COURT, it was held that where the duty is collected without any authority of law, such collection of duty is considered as collected without authority of law and, therefore, is opposed to Article 265 of the Constitution of India and, thus, unconstitutional. It is held that the assessee is not bound by the limitation prescribed under the special law for claiming the refund of the excess duty or duty collected illegality. The period of limitation prescribed under the Limitation Act would apply. 

In Gokul Agro Resources Ltd. Versus Union of India - 2020 (2) TMI 1242 - GUJARAT HIGH COURT, the refund application could not be filed within the limitation period due to technical glitches.  The High Court directed the respondent to pass an appropriate order in the refund application preferred by the assessee without raising any technical issue, within a period of four weeks. The competent authority shall not raise any technical issue with regard to the claim for refund.

In view of the above, the High Court set aside the deficiency memo and directed the Department to consider the application filed by the petitioner for the refund of tax which is exempted under the CGST Act without raising the ground of limitation.

Accordingly, the High Court allowed the writ petition