GST refund rejection quashed after department's contradictory stance on limitation under Section 54

The HC quashed a deficiency memo rejecting petitioner's GST refund claim on limitation grounds. Petitioner filed initial refund application on 08.09.2020, within the two-year limitation period under Section 54 of CGST Act 2017. When respondent issued deficiency memo on 23.09.2020, no limitation objection was raised, indicating the original application was timely. However, when petitioner filed a second application on 28.03.2020 as advised by respondent, it was rejected solely on limitation grounds. The court found this contradictory since both applications were in continuation. Respondents failed to justify their rejection and provided evasive objections without addressing the first application. The court drew adverse inference against respondents for their inconsistent stance and allowed the petition.

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Issues Involved:
1. Quashing of the deficiency memo (Form-GST-RFD-03) on the ground of limitation.
2. Direction to process and release the GST refund.
3. Opportunity of being heard before rejecting the refund claim.
4. Maintainability of the writ petition in light of alternative remedies under Section 108 of CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Quashing of the deficiency memo (Form-GST-RFD-03) on the ground of limitation:
The petitioner sought to quash the deficiency memo dated 15.10.2020, issued by the Assistant Commissioner, GST, rejecting the refund application on the ground of limitation under Section 54 of the CGST Act, 2017. The court noted that the petitioner filed the initial refund application on 08.09.2020, well within the two-year limitation period from the relevant date of 20.09.2018. The deficiency memo dated 23.09.2020 did not mention any issue of limitation, indicating that the original application was timely. The court emphasized that the follow-up application dated 28.09.2020 was a continuation of the original application and should not be considered a new application for the purposes of limitation. Consequently, the rejection of the refund application on the ground of limitation was deemed inappropriate.

2. Direction to process and release the GST refund:
The court directed the respondents, particularly respondent No.2, to process and release the GST refund of Rs.2,91,650/- along with interest at the rate of 7% from the date it became due until its final realization. The court highlighted that the original application dated 08.09.2020 was within the limitation period and the follow-up application was merely a continuation, thus the refund claim was valid.

3. Opportunity of being heard before rejecting the refund claim:
The court observed that the respondents admitted in their objections that no opportunity of being heard was afforded to the petitioner before rejecting the refund claim. Rule 92(3) of the CGST Rules mandates that no application for refund shall be rejected without giving the applicant an opportunity of being heard. The court held that the deficiency memo dated 15.10.2020 was issued in violation of this rule, further justifying the quashing of the memo.

4. Maintainability of the writ petition in light of alternative remedies under Section 108 of CGST Act, 2017:
The respondents contended that the writ petition was not maintainable due to the availability of an alternative remedy under Section 108 of the CGST Act, 2017. However, the court noted that the respondents did not raise this issue in their initial objections. Therefore, the court deemed the writ petition maintainable and proceeded to allow it.

Conclusion:
The court allowed the writ petition, quashed the deficiency memo dated 15.10.2020, and directed the respondents to process and release the GST refund along with interest. Additionally, the respondents were ordered to bear and pay the costs of Rs.30,000 to the petitioner within two months, failing which the Registrar (Judicial) was directed to frame a separate robkar against them.

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