Refund of GST paid by mistake: entitlement to refund despite Section 54(1) time bar where taxpayer discovered the error, remand ordered to process claims.

Refund of GST paid by mistake: where taxpayer paid tax by self-assessment contrary to an applicable nil-rate notification, the limitation under Section 54(1) CGST Act does not bar refund if the claim is filed after the taxpayer discovers the mistake; explanation treating refund date as payment date does not defeat entitlement where notification exempted the supply. Consequently, amounts paid from the electronic cash ledger must be refunded and adjudicating authority is directed to process claims without rejecting them solely on limitation grounds, applying the principle that tax cannot be retained where levy or collection lacks lawful authority.

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Issues Involved:
1. Whether the refund claims filed by the petitioner are time-barred under Section 54 of the CGST Act.
2. Whether the tax paid by the petitioner under a mistaken belief of law should be refunded.
3. Applicability of Article 265 of the Constitution of India concerning tax collected without authority of law.
4. Impact of Notification No. 32/2017 and subsequent notifications on the petitioner's tax liability and refund claims.

Detailed Analysis:

1. Time-barred Refund Claims:
The petitioner filed refund claims for GST paid during the period from November 2017 to September 2018, which were rejected by the Assistant Commissioner, CGST, on the grounds that they were filed beyond the statutory time limit of two years as per Section 54(1) of the CGST Act. The Appellate Authority upheld this rejection, maintaining that the refund claims were governed by the time limitation prescribed under Section 54. The petitioner argued that since the tax was paid under a mistake of law, the limitation period should not apply.

2. Tax Paid Under Mistake of Law:
The petitioner contended that they were not liable to pay GST due to the exemption provided by Notification No. 32/2017, which specified a nil rate for services provided by a government entity to the government. The petitioner argued that the tax paid under a mistaken belief should be refunded as it was collected without authority of law, invoking Article 265 of the Constitution of India. The petitioner relied on precedents where courts have held that taxes paid by mistake should be refunded, as retaining such amounts would contravene constitutional mandates.

3. Article 265 of the Constitution of India:
The petitioner emphasized that Article 265 stipulates that no tax shall be levied or collected except by authority of law. The petitioner argued that since the tax was not legally due, it should be considered a deposit rather than a tax, and the government is obligated to refund it. The petitioner cited various judgments supporting the position that taxes collected without authority of law must be refunded, irrespective of statutory limitations.

4. Impact of Notifications:
The petitioner highlighted that Notification No. 32/2017, which amended the principal notification No. 12/2017, provided an exemption for the services rendered by the petitioner, thereby negating the tax liability. The petitioner also referred to Notification No. 13/2022, which extended the period for filing refund claims by excluding the period from March 1, 2020, to February 28, 2022, from the computation of the limitation period. The petitioner argued that this extension should apply to their refund claims, making them timely for certain periods.

Conclusion:
The court acknowledged that the petitioner was entitled to the exemption under Notification No. 32/2017 and that the tax paid was indeed under a mistaken belief. The court held that the amount paid by the petitioner from the electronic cash ledger should be refunded and that the rejection of refund claims on the grounds of limitation was not tenable. The court quashed the orders of the Appellate Authority and the adjudicating authority, directing them to process the refund claims without considering the limitation period under Section 54(1) of the CGST Act. The court emphasized that taxes collected without authority of law must be refunded, upholding the principles enshrined in Article 265 of the Constitution.

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