2023 (9) TMI 1177 - HC - GST

Mistaken GST deposit on non-taxable service-refund not time-barred u/s54(1); restitution ordered, unjust enrichment rejected.

The dominant issue was whether refund of an amount deposited as GST under a mistake of law could be denied as time-barred under s.54(1) CGST Act. Applying ... Refund of tax paid under mistake of law - Article 265 - levy or collection of tax only by authority of law - applicability of limitation for refund where tax was not chargeable - GST collected without authority of law is not tax collected under the ActRefund of tax paid under mistake of law - applicability of limitation for refund where tax was not chargeable - Article 265 - levy or collection of tax only by authority of law - GST collected without authority of law is not tax collected under the Act - Whether the two-year limitation under Section 54 of the CGST Act bars refund of GST deposited by the petitioner for August, 2017 where the services were not chargeable to GST and the amount was paid under a mistake. - HELD THAT: - The court accepted that the petitioner deposited GST for August, 2017 under an erroneous belief that the services rendered were taxable, whereas in law those services were not chargeable to GST. Retention of an amount paid without authority of law would amount to collection of tax in contravention of Article 265 of the Constitution. The court relied on the principle that an amount collected without legal authority is not tax collected under the statute and therefore the statutory refund limitation prescribed for claims under the Act is inapplicable to sums paid under a mistake of law. The decision of the Gujarat High Court in M/s Cosmol Energy Private Limited was noted as dealing with the same proposition and the respondents confirmed that no appeal was filed against that decision. Applying these principles, the court concluded that the refund claim for the sum deposited in August, 2017 could not be rejected solely on the ground that the application was filed after two years and directed the respondents to process the refund claim. [Paras 12, 14, 15]The impugned orders rejecting the refund claim are set aside and the respondents are directed to process the petitioner's refund claim for August, 2017.Final Conclusion: The petition is allowed: the orders dated 04.07.2022 and 24.02.2023 rejecting the refund are set aside and the respondents are directed to process the DMRC's refund claim for the sum deposited in August, 2017, on the ground that the amount was paid under a mistake for services not chargeable to GST and thus cannot be retained consistent with Article 265. 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.