Refund claim rejection overturned as limitation period extended under Section 54(1) CGST Act due to Supreme Court order

The HC set aside the rejection of a refund claim that was deemed time-barred. The taxpayer's refund application dated 28-5-2021 for the period May-July 2018 was rejected as being beyond the limitation period under section 54(1) of CGST Act, 2017. The HC held that the limitation period was extended due to SC's order in Suo Motu Writ Petition (Civil) No. 3/2020, following similar decisions by Madras, Bombay, and Allahabad HCs. The court ruled that CBIC Circular dated 20-7-2021 cannot restrict the scope of the SC's extension order, and remanded the matter for fresh consideration with proper hearing opportunity.

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Issues:
Challenge to ex-parte rejection order for refund application based on limitation period extension due to COVID-19 lockdown and subsequent Supreme Court orders.

Analysis:
1. The petitioner sought to quash an ex-parte rejection order for a refund application, claiming it was contrary to law and Supreme Court orders extending limitation periods due to COVID-19. The rejection was solely on the grounds of being time-barred, despite the petitioner's timely filing and submission of a show-cause reply. The petitioner requested directions to allow the refund claim of Rs. 53,13,706 for compensation cess paid on exports from May 2018 to July 2018, citing Supreme Court orders extending limitation periods.

2. The impugned order dated 1-7-2021 rejected the refund application for the tax period May 2018 to July 2018 as time-barred under Rule 92(3) of CGST Rules, 2017. The petitioner had initially applied for a refund for April 2018 to October 2018, received a defective memo, and then filed a fresh application for May 2018 to July 2018. Despite the petitioner's argument of limitation extension due to Supreme Court orders, the claim was rejected under Rule 92(1), 92(3), 92(4), 92(5), and 92(7) of the Act. The respondents contended that the Supreme Court's limitation extension did not apply to GST refund applications.

3. The key issue was whether the refund application made on 28-5-2021 for the period May 2018 to July 2018 was time-barred, considering the Supreme Court's orders extending limitation periods due to COVID-19. The court referred to the Apex Court's order dated 27-4-2021, which extended limitation periods but noted that the extension was not applicable to all proceedings under GST laws. However, several High Courts had ruled in favor of extending the limitation period for GST refund applications based on the Supreme Court's orders.

4. The High Court concurred with the jurisdictional High Courts and emphasized that the refund application process under the CGST Act involved quasi-judicial proceedings, benefiting from the Supreme Court's orders on limitation extension. The court held that the rejection of the refund application solely based on limitation was incorrect. Consequently, the impugned order was set aside, and the matter was remanded to the Respondent to reconsider the decision in accordance with law, providing a hearing if necessary. The court clarified that it did not comment on the merits of the case.

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