Refund can’t be denied on limitation ground on double payment of GST

The Hon’ble Gujarat High Court in the case of Messrs Macro Polymers Private Ltd. & Anr. Versus Union Of India & Anr.  - 2025 (11) TMI 391 - GUJARAT HIGH COURT held that the refund claim for double payment of IGST, though filed beyond the period of limitation under Section 27 of the Customs Act, 1962, cannot be rejected as the revenue is not entitled to retain tax paid without authority of law, and the retention of such amount is hit by Article 265 of the Constitution of India.

Facts:

Messrs Macro Polymers Private Ltd. ('the Petitioner') is engaged in the manufacture of various resins and imported goods at Kandla Port under a valid Advance Authorization, which entitled it to exemption from payment of duties on such imports under Notification No. 18/2015-Cus and as amended by Notification No. 79/2017-Cus dated October 13, 2017.  The Union of India and Anr. ('the Respondent') involves the revenue authority.

The Petitioner contended that during the interim period between the Supreme Court’s decision in Cosmo Films Ltd. v. Union of India and the issuance of CBIC Circular No. 16/2023 dated June 07, 2023, it made a manual payment of Rs. 78,55,766 through Demand Draft under Challan TR-6 on June 07, 2023 to comply with the six-week deadline stipulated by the Supreme Court in UNION OF INDIA & ORS. Versus COSMO FILMS LIMITED - 2023 (5) TMI 42 - Supreme Court.​

Subsequently, following the prescribed procedure in the CBIC Circular, the Petitioner had all 11 Bills of Entry re-assessed and made a second electronic payment of the same amount on March 29, 2024 through the Customs EDI System. This resulted in a double payment for which the Petitioner sought a refund of the manually paid amount.

The Respondent contended that the refund claim for the manual payment was time-barred under Section 27 of the Customs Act, 1962, as it was filed on June 13, 2024, beyond the one-year limitation period computed from the date of re-assessment, and that the rejection of the refund claim by the Assistant Commissioner, Central Excise, Customs House, Kandla, through Order-in-Original dated November 26, 2024 was justified.

The Petitioner’s grievance is that despite making double payment of the same tax amount, the revenue refused to refund the first manual payment solely on grounds of limitation, and therefore, it approached the Gujarat High Court by way of a writ petition seeking quashing of the impugned order and direction for refund.​

Issue:

Whether the refund claim for double payment of IGST, filed beyond the period of limitation under Section 27 of the Customs Act, 1962, can be rejected when the revenue has no authority to retain tax paid without legal basis?

Held:

The Hon’ble Gujarat High Court in Messrs Macro Polymers Private Ltd. & Anr. Versus Union Of India & Anr.  - 2025 (11) TMI 391 - GUJARAT HIGH COURT held as under:

• Observed that, the Petitioner has admittedly deposited the amount of Rs. 78,55,766 twice, once manually on June 07, 2023 and again electronically on March 29, 2024 after re-assessment of the Bills of Entry, and that the petitioner was not required to pay duty twice as per the decision of the Hon’ble Apex Court in Cosmo Films Ltd (Supra).
• Noted that, the Petitioner explained the reason for the manual payment, namely, the need to comply with the six-week deadline set by the Supreme Court in its judgment in Cosmo Films Ltd (Supra) dated April 28, 2023, and that no procedure or circular was available at the relevant time for making such payment.​
• Held that, when the Petitioner has deposited the amount twice, it would not be covered by the provision of Section 27 of the Customs Act, and no limitation would apply as the same is required to be refunded by the Respondent authority and could not have been rejected on the ground of limitation under Section 27.​
• Allowed the writ petition and directed the Customs Authorities to refund the amount of Rs. 78,55,766 deposited through manual challan within eight weeks, without interest, as the same was deposited twice voluntarily on the belief that the time limit granted by the Hon’ble Apex Court was expiring.​

Our Comments:

The judgment applies the principle that tax collected without authority of law must be refunded, irrespective of statutory limitation periods. The Court’s reliance on M/s. Gujarat State Police Housing Corporation Ltd. Versus Union of India & Anr. - 2024 (1) TMI 1409 - GUJARAT HIGH COURT, and

In the case of Messrs Aalidhra Texcraft Engineers & Anr. Versus Union Of India & Ors. - 2025 (1) TMI 50 - GUJARAT HIGH COURT the Gujarat High Court held that where an amount is deposited by mistake, voluntarily and not towards any tax, interest, or penalty, the revenue cannot retain such money merely by the operation of refund limitation provisions. The Court relied on the earlier judgment in M/s. Gujarat State Police Housing Corporation Ltd. Versus Union of India & Anr. - 2024 (1) TMI 1409 - GUJARAT HIGH COURT, noting that when a taxpayer pays a sum under a mistaken notion and is not actually liable, retention of such amount by the revenue is hit by Article 265 of the Constitution, which says that no tax shall be levied or collected except by authority of law. Such mistaken deposits do not fall under the category of “tax” under the refund provisions of the relevant statute and, therefore, procedural limitations under refund sections (like Section 54(1) and Explanation 2(h) of the CGST Act or Section 27 of the Customs Act) do not apply.​

The reasoning aligns with the Supreme Court’s dictum in Salonah Tea Company Limited And Others Versus Superintendent of Taxes, Nowgong, And Others - 1987 (12) TMI 3 - Supreme Court where it was held that money collected without authority of law must be refunded, and limitation cannot be a bar when the exaction itself is unconstitutional.

In SWASTIK SANITARYWARES LTD Versus UNION OF INDIA - 2012 (11) TMI 149 - GUJARAT HIGH COURT, the Gujarat High Court held that a second deposit made by mistake on clearance of the same goods does not constitute excise duty payment but is a mistaken deposit that the Government cannot retain. The Court clarified that such deposits fall outside the refund provisions like Section 11B of the Central Excise Act, and lack of a specific statutory remedy for such refunds does not prevent the Court from directing their return. Refund claims of mistaken deposits should not be denied unless there is undue delay by the claimant. The judgment affirms the principle that retaining mistaken or excess payments violates Article 265 of the Constitution of India and such amounts must be refunded unless there is laches or prejudice to the government or third parties.

Relevant Provisions:

Section 27 of the Customs Act, 1962

'27. Claim for refund of duty

(1) Any person claiming refund of any duty or interest,-

1. paid by him; or
2. borne by him,

may make an application in such form and manner as may be prescribed for such refund to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of one year, from the date of payment of such duty or interest:

Provided that where an application for refund has been made before the date on which the Finance Bill, 2011 receives the assent of the President, such application shall be deemed to have been made under sub-section (1), as it stood before the date on which the Finance Bill, 2011 receives the assent of the President and the same shall be dealt with in accordance with the provisions of sub-section (2):

Provided further that the limitation of one year shall not apply where any duty or interest has been paid under protest.

Provided also that where the amount of refund claimed is less than rupees one hundred, the same shall not be refunded.

Explanation. - For the purposes of this sub-section, 'the date of payment of duty or interest' in relation to a person, other than the importer, shall be construed as 'the date of purchase of goods' by such person.

(1A) The application under sub-section (1) shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C ) as the applicant may furnish to establish that the amount of duty or interest, in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty or interest, has not been passed on by him to any other person.

(1B) Save as otherwise provided in this section, the period of limitation of one year shall be computed in the following manner, namely-

1. in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 25, the limitation of one year shall be computed from the date of issue of such order;
2. where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of one year shall be computed from the date of such judgment, decree, order or direction;
3. where any duty is paid provisionally under section 18, the limitation of one year shall be computed from the date of adjustment of duty after the final assessment thereof or in case of re-assessment, from the date of such re-assessment.”

Circular No. 16/2023-Cus dated June 07, 2023

“Implementation of Hon'ble Supreme Court direction in judgment dated 28.04.2023 in matter of Civil Appeal No. 290 of 2023 relating to 'pre-import condition' - Reg.

Attention is invited to Hon'ble Supreme Court judgment dated 28.04.2023 in matter of Civil Appeal No. 290 of 2023 (UOI and others vs. Cosmo Films Ltd.) relating to mandatory fulfillment of a 'pre-import condition' incorporated in para 4.14 of FTP 2015-20 vide the Central Government (DGFT) Notification No. 33/2015-20 dated 13.10.2017, and reflected in the Notification No. 79/2017-Customs dated 13.10.2017, relating to Advance Authorization scheme..

….

5.2 Keeping above aspects in view, noting that the order of the Hon'ble Court shall have bearing on importers others than the respondents, and for purpose of carrying forward the Hon'ble Court's directions, the following procedure can be adopted at the port of import (POI):-
(c) the payment of tax and cess, along with applicable interest, shall be made against the electronic challan generated in the Customs EDI System.

(d) on completion of above payment, the port of import shall make a notional OOC for the BE on the Customs EDI System so as to enable transmission to GSTN portal of, inter alia, the IGST and Compensation Cess amounts with their date of payment (relevant date) for eligibility as per GST provisions”

 (Author can be reached at [email protected])