2023 (9) TMI 1177 - HC - GST

Delhi Metro Wins GST Refund Battle: Statutory Time Limit Waived Due to Mistaken Payment and Constitutional Principles

Delhi Metro Rail Corporation Ltd. Versus The Additional Commissioner, Central Goods And Services Tax Appeals II & Ors

HC ruled in favor of DMRC, overturning the rejection of its GST refund claim. Despite filing beyond the two-year statutory period, the court determined ... Refund of amount deposited under a mistake - rejection on the ground that the application for refund was filed beyond the period of two years as stipulated under Section 54(1) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Article 265 of the Constitution of India proscribes any levy or collection of tax except by authority of law. Concededly, GST is not payable by the DMRC in respect of the service of preparation of Detailed Project Report for respondent no. 3. Thus, the amount of ₹2,90,520/- deposited by the DMRC on an erroneous belief that payment for services rendered by it were chargeable to tax, cannot be retained by the respondents. It is well settled that GST is an indirect tax. The burden of such tax is inevitably borne by the final recipient. In the present case, respondent no. 3 would be liable to reimburse the GST chargeable on services availed by it. But since GST is not payable in respect of such services, respondent no. 3 has not paid the said amount - the period of limitation for applying for a refund as prescribed under Section 54 of the CGST Act, would not apply where GST is not chargeable and it is established an amount has been deposited under a mistake of law. The impugned order set aside - petition allowed. Issues involved:The petitioner (DMRC) challenges the rejection of its refund claim based on the application filed beyond the stipulated period under Section 54(1) of the Central Goods and Services Tax Act, 2017.Detailed Judgment:Issue 1: Refund claim rejectionThe DMRC filed a petition against the rejection of its refund claim of Rs. 2,90,520 deposited under a mistake, which was denied due to the application being filed after the prescribed two-year period under the CGST Act.Issue 2: Mistaken depositThe DMRC deposited the amount with GST authorities after invoicing services for a project, including GST, which the recipient did not pay. Subsequently, it was clarified that the services were not taxable under GST, leading to the refund claim.Issue 3: Legal positionThe DMRC argued that retaining the amount paid under a mistake would violate Article 265 of the Constitution, citing legal precedents where refunds were granted for payments made under a mistake of law.Issue 4: Interpretation of CGST ActThe DMRC relied on a Gujarat High Court decision stating that Section 54 of the CGST Act does not apply to amounts collected without legal authority, supporting the refund claim based on mistaken payment.Issue 5: Constitutional validityArticle 265 of the Constitution prohibits tax collection without legal authority. Since GST was not applicable to the DMRC's services, the deposited amount should be refunded as it was collected erroneously.Issue 6: Burden of taxAs GST is an indirect tax, the burden falls on the final recipient, who should reimburse the GST. In this case, since GST was not payable, the recipient did not pay the amount, justifying the refund to DMRC.Issue 7: Limitation for refundThe limitation period under Section 54 of the CGST Act does not apply when an amount is deposited under a mistake of law, as established in this case, warranting the approval of the refund claim.Conclusion:The High Court set aside the orders rejecting the refund claim and directed the respondents to process the DMRC's claim for the refund of Rs. 2,90,520, allowing the petition in favor of DMRC.