Court quashes deficiency memo, orders refund claim processing for IGST paid under reverse charge

The court ruled in favor of the petitioner, quashing the deficiency memo issued by the respondent. The court directed the respondent to process the petitioner's refund claim for IGST paid under the reverse charge mechanism. The court held that the tax collected was without legislative competence, entitling the petitioner to a refund. The court clarified that the refund claim fell under the Limitation Act, not the CGST Act. The court invoked its jurisdiction under Article 226 of the Constitution to order the refund, directing the respondent to process the refund claim with interest by a specified date.

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Issues Involved:
1. Legality of the Deficiency Memo issued by the Respondent.
2. Entitlement of the Petitioner to a refund of IGST paid under reverse charge mechanism.
3. Applicability of Section 54 of the CGST Act versus Section 17 of the Limitation Act for claiming refunds.
4. Jurisdiction and authority of the court under Article 226 of the Constitution to order refunds.

Issue-wise Detailed Analysis:

1. Legality of the Deficiency Memo issued by the Respondent:
The petitioner challenged the Deficiency Memo issued by the respondent on the grounds that it was based on an erroneous premise. The memo claimed that the refund applications were not filed within the statutory time limit as provided under Section 54 of the CGST Act. The court found that the deficiency memo was wrongly issued because the amount collected was without authority of law, and thus, the statutory time limit under Section 54 was inapplicable.

2. Entitlement of the Petitioner to a refund of IGST paid under reverse charge mechanism:
The petitioner sought a refund of the IGST paid on ocean freight under the reverse charge mechanism. The court referenced its earlier judgment in the case of Mohit Minerals Pvt. Ltd., where it declared Notification No. 8/2017 and Entry No. 10 of Notification No. 10/2017 as unconstitutional. Consequently, the court held that the petitioner was entitled to a refund since the tax was collected without legislative competence.

3. Applicability of Section 54 of the CGST Act versus Section 17 of the Limitation Act for claiming refunds:
The court examined whether the refund claims should fall under Section 54 of the CGST Act or Section 17 of the Limitation Act. It concluded that Section 54 is applicable only for refunds of tax paid under the CGST Act. Since the amount collected was without authority of law, it did not qualify as tax under the CGST Act, making Section 54 inapplicable. Instead, Section 17 of the Limitation Act, which deals with relief from the consequences of a mistake, was deemed appropriate. The court cited several precedents, including the cases of Binani Cement Ltd., Joshi Technology International, and 3E Infotech Ltd., to support this interpretation.

4. Jurisdiction and authority of the court under Article 226 of the Constitution to order refunds:
The court emphasized its jurisdiction under Article 226 of the Constitution to order refunds of amounts collected without authority of law. It referenced the case of State of Madhya Pradesh vs. Bhailal Bhai, where the Supreme Court held that the High Court has the power to order repayment of money realized by the government without authority of law. The court also cited its own decisions in Gokul Agro Resources Ltd. and Bharat Oman Refineries Ltd., where it directed the respondents to process refund claims without raising technical issues.

Conclusion:
The court quashed the deficiency memo issued by the respondent and directed them to process the refund claim filed by the petitioner for the months of February and March 2018. The refund amount of Rs. 93.54 lakh was to be processed along with simple interest at the rate of 6% per annum. The court mandated that this exercise be completed by 17th August 2021. The writ application was thereby disposed of.

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