Tax Refund Timeline Vindicated: CBIC Circular Interpretation Validates Timely Applications Against Procedural Rejection

HC ruled that refund applications were timely based on CBIC circular clarifying "Relevant Date" for tax refund calculations. Despite initial rejections by Appellate Authority for alleged delay, the court found applications within prescribed limitation period. The order set aside the previous dismissal and directed reconsideration of the refund claim on substantive merits.

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Issues Involved:
1. Limitation period for filing refund application under GST laws.

The judgment deals with a case where the petitioner had erroneously declared the total taxable value for intra-State supply of services under the wrong tax heads, leading to a double deposit of tax. The petitioner subsequently sought a refund, but the application was rejected by the Appellate Authority solely on the ground of delay in filing the refund application within the limitation period prescribed under Section 54 of the Central Goods and Service Tax Act, 2017 (CGST Act). The main issue was whether the application seeking refund was within the prescribed time limit.

The Appellate Authority had held that the application seeking refund was belated and dismissed the appeal on the ground of delay. However, the petitioner contended that the circular dated 25.09.2021 issued by the Central Board of Indirect Taxes and Customs clarified the interpretation of the "Relevant Date" for filing refund applications, which could affect the limitation period for their case. The circular specified that the "Relevant Date" for filing refund applications would be the date when tax is paid under the correct head.

The petitioner had paid tax under the wrong head on 20.12.2017 and under the correct head on 19.08.2019. As per the circular, the petitioner could have filed an application before expiry of two years from the date of payment of tax under the correct head. The petitioner filed the first refund application on 11.05.2020, which was rejected before the issuance of the circular. Subsequently, a second application was filed on 14.07.2022, which was also rejected. However, both applications were within the limitation period as clarified by the circular dated 25.09.2021.

The High Court held that both refund applications were covered by the circular and were within the limitation period. The Appellate Authority erred in not considering the circular and wrongly dismissing the appeal on the ground of delay. The court set aside the order of the Appellate Authority and directed it to reconsider the appeal on its merits in accordance with the law. The petition was allowed in favor of the petitioner.

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