2025 (3) TMI 835 - HC - GST

Refund claims valid under Section 54 CGST Act; Circular and Rule 90(3) proviso not retrospective; Explanation 2(e) unchanged

HC held the refund claims were within the statutory limitation under Section 54 of the CGST Act and that Circular No.125/44/2019 could not impose a fresh ... Time limitation for filing refund claim - seeking to direct the first respondent to extend the benefit of proviso introduced under Rule 90(3) of the Central Goods and Services Tax (CGST) Rules, 2017 to exclude the number of days from the date of filing of refund claim to the date of issue of Deficiency Memo for the purpose of computation of limitation - applicability and interpretation of Paragraph 12 of Circular No.125/44/2019 issued by the Central Board of Indirect Taxes and Customs (CBIC) regarding the treatment of refund applications filed after rectification of deficiencies. HELD THAT:- Admittedly, the exports were made by the petitioner during July 2017, August 2017 and September 2017. Refund claims were filed during the months of September 2018 and October 2018. These refund claims were filed in the portal and were thus prima facie in time. This was in accordance with Circular No.79/53/2018-GST dated 31.12.2018 which was vague. It specified that the refund application in FORM GST RFD-01A, along with all supporting documents, shall be submitted electronically. Since the petitioner has effected Zero Rated Supplies within the meaning of Section 16(1) of IGST Act, 2017, the “relevant date” during the period in dispute would be 2 years from the end of the “tax period”. Admittedly, in this case, the refunds are all unutilized Input Tax Credit on the Zero Rated Supply (Exports) under Section 16(3)(a) of IGST Act, 2017 - The amendment to Explanation 2(e) to Section 54 of CGST Act, 2017 with effect from 01.02.2019 vide N/N. 02/2019-CT dated 29.01.2019 pursuant to CGST Amendment Act, 2018 (31/2018) dated 30.08.2018 was intended clarify what was explicit in Clause (ii) to Proviso to Section 54(3) of CGST Act, 2017. A reading of the limitation under Explanation 2(a) to Section 54 of CGST Act, 2017 and Explanation 2(e) to Section 54 of CGST Act, 2017 till 31.01.2014 indicates that they provide two periods of limitation namely for refund of unutilised Input Tax Credit. As per Circular No.79/53/2018-GST dated 31.12.2018, an exporter was required to file refund claim / application FORM GST RFD-01A on the common portal and take a print out of the same and submit it physically to the jurisdictional tax office along with all supporting documents. Thus, refund claims were refiled manually along with supporting documents on 28.03.2019. These refund claims were however returned for defects. Thus, they were thereafter re-presented on 18.10.2019 and were acknowledged on 01.11.2019 - The amendment to Clause 2(e) to Section 54(14) of CGST Act vide Notification No.02/2019-CT dated 29.01.2019 is not relevant for the purpose of computation of limitation. Proviso to Rule 90(3) was inserted with effect from 18.05.2021 vide Notification No.15/2021-CT dated 18.05.2021. It was not in the statute where refund claims were originally filed or later represented. Therefore, it cannot be given retrospective effect. Conclusion - i) The refund claims filed by the petitioner were within the limitation period as per the statutory provisions of Section 54 of the CGST Act, 2017. ii) Circular No.125/44/2019 could not impose a fresh limitation period contrary to the statutory provisions. iii) The proviso to Rule 90(3) of the CGST Rules, 2017, introduced in 2021, was not applicable retrospectively to the petitioner's claims. iv) The amendment to Explanation 2(e) to Section 54 did not affect the limitation period for the petitioner's claims, as they were filed prior to the amendment. Petition dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the refund claims filed by the petitioner were within the limitation period as per Section 54 of the Central Goods and Services Tax (CGST) Act, 2017.The applicability and interpretation of Paragraph 12 of Circular No.125/44/2019 issued by the Central Board of Indirect Taxes and Customs (CBIC) regarding the treatment of refund applications filed after rectification of deficiencies.The validity and retrospective application of the proviso introduced under Rule 90(3) of the CGST Rules, 2017.The effect of amendments to Explanation 2(e) to Section 54 of the CGST Act, 2017 on the computation of the limitation period for refund claims.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Limitation Period for Refund ClaimsLegal Framework and Precedents: Section 54 of the CGST Act, 2017 governs the refund of tax, stipulating a two-year limitation period from the 'relevant date' for filing refund claims. Explanation 2 to Section 54 defines the 'relevant date' for various scenarios, including exports.Court's Interpretation and Reasoning: The Court emphasized that the refund claims were initially filed within the prescribed period based on the original understanding of the 'relevant date' as per Explanation 2(a) to Section 54.Application of Law to Facts: The Court noted that the refund claims were filed within two years from the date of export, which was consistent with the statutory provisions applicable at the time of filing.Conclusion: The Court held that the refund claims were filed within the limitation period and rejected the Department's contention that the claims were time-barred.Issue 2: Interpretation of Circular No.125/44/2019Legal Framework and Precedents: Paragraph 12 of the Circular states that a rectified refund application is treated as a fresh application and must be submitted within two years of the relevant date.Court's Interpretation and Reasoning: The Court found that the Circular's interpretation was inconsistent with the statutory provisions of Section 54, which did not envisage a fresh limitation period starting from the date of rectification.Conclusion: The Court concluded that the Circular could not override the statutory provisions and the refund claims were validly filed within the original limitation period.Issue 3: Retrospective Application of Proviso to Rule 90(3)Legal Framework and Precedents: Rule 90(3) of the CGST Rules, 2017, as amended, allows for the exclusion of the period between the filing of the original refund claim and the issuance of a deficiency memo from the limitation period.Court's Interpretation and Reasoning: The Court determined that the proviso to Rule 90(3) was not applicable retrospectively, as it was introduced after the refund claims were filed.Conclusion: The Court held that the proviso could not be applied to the petitioner's claims, but the claims were still within the limitation period based on the original filing dates.Issue 4: Effect of Amendments to Explanation 2(e)Legal Framework and Precedents: The amendment to Explanation 2(e) to Section 54 clarified the limitation period for refund claims related to unutilized Input Tax Credit (ITC).Court's Interpretation and Reasoning: The Court observed that the amendment did not affect the petitioner's claims, as they were filed before the amendment came into effect.Conclusion: The Court found that the amendment did not alter the limitation period applicable to the petitioner's refund claims.3. SIGNIFICANT HOLDINGSThe Court held that the refund claims filed by the petitioner were within the limitation period as per the statutory provisions of Section 54 of the CGST Act, 2017.The Court determined that Circular No.125/44/2019 could not impose a fresh limitation period contrary to the statutory provisions.The proviso to Rule 90(3) of the CGST Rules, 2017, introduced in 2021, was not applicable retrospectively to the petitioner's claims.The amendment to Explanation 2(e) to Section 54 did not affect the limitation period for the petitioner's claims, as they were filed prior to the amendment.The Court allowed the writ petitions challenging the rejection of refund claims and dismissed the petitions challenging the Circular and seeking a writ of mandamus, as they were rendered unnecessary by the decision on the primary issues.