Limitation for Tax Refund Starts from IGST Deposit Date Under Section 19 IGST Act

The HC held that the limitation period for refund of excess tax begins from the date the tax was deposited under the IGST Act, not from the earlier date of SGST and CGST deposit. The Respondent erred in calculating limitation from January 2018, rendering Section 77 of the BGST/CGST Act and Section 19 of the IGST Act ineffective. The Court relied on a clarificatory Circular and precedent from the JH HC affirming extension of limitation in cases of wrongful tax deposit. Consequently, the impugned order rejecting the refund was set aside, and the application for refund was allowed.

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ISSUES:

Whether the refund application filed for excess tax paid under the CGST and BGST Acts can be rejected on the ground of limitation prescribed under Section 54 of the BGST/CGST Act, 2017, when the claim arises under Section 77 of the Act for tax wrongfully collected and paid.What is the relevant date for computing the limitation period for filing refund claims under Section 77 of the BGST/CGST Act, 2017 read with sub-rule (1A) of Rule 89 of the CGST Rules, 2017'Whether Circular No. 162/18/2021-GST dated 25.09.2021 issued by CBIC clarifies or alters the limitation period applicable to refund claims under Section 77 of the BGST/CGST Act, 2017 and Section 19 of the IGST Act, 2017.Whether the limitation period under Section 54 of the BGST/CGST Act, 2017 applies to refund claims arising from payment of tax under a wrong head as governed by Section 77 of the Act.Whether the rejection of refund application without considering the provisions of Section 77 and the clarificatory Circular violates the statutory scheme of the Goods and Services Tax Act and Rules, 2017.Whether the petitioner is entitled to refund along with interest for the excess tax paid and rejected on limitation grounds.

RULINGS / HOLDINGS:

The refund application filed under Section 77 of the BGST/CGST Act, 2017 for tax wrongfully collected and paid cannot be rejected on the ground of limitation prescribed under Section 54, as Section 77 "in no manner prescribes any period of limitation for filing any refund claims."The relevant date for computing the limitation period under Section 77 read with sub-rule (1A) of Rule 89 of the CGST Rules, 2017 is the date of payment of tax under the correct head, i.e., the date when the petitioner paid the IGST after audit objection, not the original date of payment under the wrong head.The Circular No. 162/18/2021-GST dated 25.09.2021 clarifies that the term "subsequently held" covers cases where the taxpayer himself or the tax officer subsequently holds the supply to be inter-State or intra-State, and prescribes that refund claims under Section 77/Section 19 must be filed within two years from the date of payment of tax under the correct head or within two years from the date of issuance of the Circular if the payment was made before the Circular's notification date.The limitation period under Section 54 applies generally to refund claims but does not apply to refund claims under Section 77, which governs tax paid under the wrong head; thus, Section 54 cannot be invoked to reject such refund claims.The rejection of the refund application solely on the ground of limitation under Section 54 without due consideration of Section 77 and Circular No. 162/18/2021-GST is "bad in law" and renders the provisions of Section 77 and the Circular redundant.The petitioner is entitled to refund of the excess CGST and SGST paid, along with interest at the rate of 6% per annum from the date beginning after three months from the date of filing the refund application until the date of payment.

RATIONALE:

The Court applied the statutory provisions of Section 54 (Refund of Tax), Section 77 (Tax wrongfully collected and paid), and Rule 89(1A) of the CGST Rules, 2017, along with the clarificatory Circular No. 162/18/2021-GST issued by CBIC to interpret the limitation period applicable to refund claims arising from payment of tax under the wrong head.The Court relied on the interpretation that the limitation period under Section 77 starts from the date of payment of tax under the correct head, not from the original payment under the wrong head, consistent with the Circular's explanation and illustrations.The Court noted that the Circular extended a benevolent provision for extension of limitation for refund in cases of wrong deposit, thereby preventing the application of the general two-year limitation under Section 54 to Section 77 claims.The Court referred to precedent from the Jharkhand High Court which upheld the Circular's interpretation and benevolent approach towards limitation in such refund claims.The Court emphasized that ignoring Section 77 and the Circular would render these provisions redundant and frustrate the legislative intent to provide refund remedies for wrong tax payments.No dissent or doctrinal shift was noted; the judgment aligns with the existing statutory framework and clarificatory administrative instructions.

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