Refund limitation by delegated rule cannot override the parent Act; pending refund claims cannot be defeated by later dues or delay.

A delegated rule cannot impose a limitation period that extinguishes a statutory refund right where the parent Act does not authorise such restriction. On that basis, rejection of the refund claim as time-barred under the rule was unsustainable. Outstanding dues could be adjusted only within the limits of the Act and Rules, and later-arising dues could not be used to defeat a pending refund claim. Prolonged delay in processing the application, without satisfactory explanation, also supported the taxpayer's entitlement to statutory interest. The refund rejections were quashed and the authorities were directed to compute the refund with interest in accordance with law.

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Issues: (i) Whether a refund application could be rejected on the ground of limitation when the parent Act did not prescribe a period of limitation and the time limit was introduced only by the Rules. (ii) Whether the refund claim could be denied on the basis of outstanding dues and delay in processing the refund application.

Issue (i): Whether a refund application could be rejected on the ground of limitation when the parent Act did not prescribe a period of limitation and the time limit was introduced only by the Rules.

Analysis: The statutory scheme of the parent Act was examined to determine whether the rule-making power could be used to create a limitation period for refund claims. The Act expressly conferred time-limit prescriptions in some provisions, but not in the refund provision. The distinction between procedural rules and provisions that extinguish or impair a substantive statutory right was applied. A rule that bars the refund claim itself was treated as travelling beyond delegated procedural power when the parent Act did not authorise such restriction.

Conclusion: The refund claim could not be rejected as time-barred merely on the basis of Rule 19(2)(a); the rejection on limitation was unsustainable and was in favour of the assessee.

Issue (ii): Whether the refund claim could be denied on the basis of outstanding dues and delay in processing the refund application.

Analysis: The Court construed the refund and adjustment provisions to hold that existing dues at the relevant statutory stage could be adjusted only within the limits of the Act and Rules, and that subsequent or later-arising dues could not be used to defeat a pending refund claim. The prolonged pendency of the refund application, coupled with the absence of any satisfactory explanation and the entitlement to statutory interest after the prescribed period, supported the conclusion that the departmental action was unjust and arbitrary.

Conclusion: Denial of refund on the basis of outstanding dues was not justified on the facts, and the assessee succeeded on this issue as well.

Final Conclusion: The refund rejections were quashed, the authorities were directed to compute refund with interest in accordance with law, and the writ petitions were disposed of in favour of the assessee.

Ratio Decidendi: A delegated rule cannot impose a limitation that extinguishes a statutory refund right where the parent Act does not authorise such a restriction, and refund entitlement cannot be defeated by invoking dues or delays in a manner inconsistent with the Act.

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