2025 (8) TMI 241 - HC - GST

Mandatory 60-Day Deadline Under Section 54(7) WBGST Act Must Be Strictly Followed for Refund Orders

The HC held that the 60-day period under Section 54(7) of the WBGST Act, 2017 for passing an order on a refund application is mandatory, and ... Time limitation for passing an order on refund application - period of 60 days under Section 54(7) of WBGST Act, 2017 is mandatory or not - scope of interference in the present intra-court appeal. Whether the period of 60 days under Section 54(7) of the Act is mandatory? - HELD THAT:- The overarching outer limit of passing an order under Section 54(5) is 60 days from the date of the application filed under Section 54(1), in terms of Section 54(7) of the Act. It is to be noted that the expression “shall” has been used in Section 54(7), as opposed to “may”. As held by the Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited, [2022 (7) TMI 581 - SUPREME COURT], the expression “shall” postulates a mandatory requirement and raises a presumption that the concerned provision is imperative, unless such presumption is rebutted by other considerations such as the scope of the enactment and the consequences flowing from the construction. The PO, before passing the order within 60 days, does not only have to “consider the reply”, as mandated by Rule 92(3), but also to give the applicant an opportunity of hearing under the proviso to the said sub-rule. The dual requirement of consideration of reply and opportunity of hearing makes it quite obvious that the date of reply has to precede the date of hearing, since otherwise, the hearing being granted to the applicant would be an empty formality, without the pleading of the applicant in the form of his reply being on record - the balance number of days left for completion of the 60-day outer limit, after deducting the 15 days taken for scrutiny and acknowledgment (at the beginning of the spectrum) and the 15 days between the Show Cause Notice and the reply (at the end of the spectrum), is 30 days. In order to enable a consideration of the reply and an opportunity of hearing to be given on the reply upon notice to the applicant, the said 30 days has to be utilised by the PO. Although the 15-day timeline in Rule 90(2) pertains to the scrutiny of the application for its completeness, as per the clear language of the said sub-Rule, once an application is scrutinised and found to be complete, an acknowledgment has to be issued simultaneously in FORM GST RFD-02. Since the scrutiny itself is for the purpose of ascertaining completeness, there cannot be any reason, once the scrutiny is completed and the application is found to be complete, for wasting further time in issuing acknowledgment. Hence, the timeline of 15 days stipulated in Rule 90(2) governs the completion of the scrutiny regarding completeness as well as issuance of acknowledgment of itself. It has been consistently held by the Division Benches of the Delhi High Court in Smartadmedia v. Commissioner of Delhi Goods and Service Tax, [2024 (5) TMI 603 - DELHI HIGH COURT], M.D. Securities Pvt. Ltd. v. Sales Tax Officer Avato, [2025 (5) TMI 2174 - DELHI HIGH COURT] and Jian International v. Commissioner of Delhi goods and Services Tax, [2020 (7) TMI 611 - DELHI HIGH COURT] that the non-adherence to the timelines stipulated in the Act and the Rules vitiates the entire process and disentitles the PO from claiming any deficiency in the application. The statutory time limit of 60 days as stipulated in Section 54(7) of the Act is mandatory and non-compliance of the same vitiates any order passed in violation thereof under Section 54(5) of the Act. Whether the orders of rejection of the appellant’s claim of refund by the Assistant Commissioner and the Appellate Authority are otherwise bad in law? - HELD THAT:- The limited charter of the GST Authorities is merely to ascertain whether such duties and charges have been duly payable, which is amply proved in the instant case by the Customs documents issued by the Indian Customs Authorities to the appellant at the time when the appellant’s exported goods crossed the Indian border - However, the PO went way beyond his jurisdiction in seeking to ascertain whether the goods were actually received by the importer, which is a completely extraneous consideration in the present context. The scope of ascertainment of the GST Authorities is whether the applicant has paid all duties and taxes for export, of which the conclusive proof are the relevant documents issued by the Customs Authorities of India, which were furnished by the applicant duly. It is entirely beyond the look-out of the respondent-Authorities as to what happened to such goods after they cross the border of India or whether the importer takes the goods at all, since the amount of refund under the Act is to be calculated not on the fate of the exported goods but on the payment of duties and charges having actually been made by the applicant. In the present case, since such issue was clearly clinched by the appellant by producing necessary documents as contemplated in Rule 89(2)(b) of the Rules, read with the relevant provisions of the Customs Act, there was no scope at all for the respondent-Authorities to refuse the refund in the first place. Thus, the impugned orders of the PO rejecting the claim and the Appellate Authority affirming the same, being de hors the law, are palpably vitiated by contravention of law. The scope of interference in the present intra-court appeal - HELD THAT:- Double standards were applied in the impugned judgment, by holding on the one hand that the Authority could not have extended the time for filing reply, since Rule 92 was mandatory, while failing to observe on the other hand that the overarching time-limit of 60 days stipulated in Section 54(7) of the Act itself was also mandatory by the same logic. If Rule 92 and Rule 90 are mandatory, it is the PO himself who violated the same by issuing the acknowledgment late and fixing even the date of filing reply one day after the expiry of 60 days from the application, leaving no time whatsoever for a further opportunity of hearing and a consideration of the reply in terms of Rule 92(3) of the Rules - The contradiction in the observations of the learned Single Judge is that if the timelines were mandatory for the applicant, by the same logic, they were mandatory for the respondent-Authorities as well. Thus, despite the constraints of interference in an intra-court appeal, in the present case, there was a violation of law ex facie evident from the impugned judgment and, as such, there are no other option but to set aside the same - application allowed. ISSUES: Whether the 60-day period under Section 54(7) of the West Bengal Goods and Services Tax Act, 2017 ('the Act') for passing an order on refund applications is mandatory or directory.Whether the rejection orders of the refund claim by the Proper Officer and the Appellate Authority are valid and sustainable in law.The scope and extent of judicial interference in an intra-court appeal challenging orders under the Act. RULINGS / HOLDINGS: The statutory time limit of 60 days as stipulated in Section 54(7) of the Act is mandatory and non-compliance vitiates any order passed under Section 54(5). The use of the word 'shall' in Section 54(7) indicates an imperative requirement.The orders rejecting the refund claim are bad in law due to multiple violations of the statutory timelines, including issuance of acknowledgment beyond 15 days as required under Rule 90(2), issuance of Show Cause Notice after an inordinate delay, and fixing the date of reply beyond the 60-day limit, leaving no time for the mandatory opportunity of hearing and consideration of the reply as required under Rule 92(3) and its proviso.The Proper Officer exceeded jurisdiction by relying on extraneous and irrelevant considerations such as alleged absence of E-way Bills where exempted under Rule 138(14)(b), and unverified information from foreign Customs Authorities, disregarding conclusive Indian Customs documents proving export and payment of duties.Judicial interference in the intra-court appeal is justified where there is a clear violation of mandatory statutory provisions and the impugned orders are palpably vitiated by contravention of law. RATIONALE: The Court applied the provisions of Section 54 of the Act and the corresponding Rules 90 and 92 of the West Bengal Goods and Services Tax Rules, 2017, interpreting the timelines as mandatory due to the use of the word 'shall' and the taxing nature of the statute requiring strict compliance.The Court relied on authoritative precedents from the Delhi High Court, including Smartadmedia v. Commissioner of Delhi GST and M.D. Securities Pvt. Ltd. v. Sales Tax Officer Avato, which held that non-adherence to timelines results in loss of the authority's right to point out deficiencies and mandates refund.The Court referred to Circular No. 125/44/2019-GST issued by the Central Board of Indirect Taxes and Customs, which advises that final sanction and payment orders be issued within 45 days from the ARN generation to ensure disbursement within 60 days, underscoring the mandatory nature of timelines.The Court rejected the argument that Section 56 of the Act (providing for interest on delayed refunds) renders Section 54(7) directory, reasoning that interest provisions emphasize rather than dilute the mandatory nature of the 60-day limit.The Court distinguished Section 75 of the Act as pertaining to demand and recovery and not applicable to refund proceedings under Section 54.The Court emphasized that the Proper Officer's jurisdiction is limited to verifying payment of duties and taxes evidenced by prescribed documents (shipping bills, export invoices, and Indian Customs clearances) and does not extend to verifying receipt of goods by the importer or relying on foreign customs information.The Court underscored the procedural safeguards under Rule 92(3), including the requirement of issuing a Show Cause Notice, allowing 15 days to reply, providing an opportunity of hearing, and considering the reply before passing an order, all within the 60-day outer limit.The Court held that failure to adhere to these timelines and procedural safeguards vitiates the refund rejection orders and mandates refund with interest.The Court found the impugned judgment erred in holding timelines directory and misapplied the statutory scheme, justifying interference in the intra-court appeal.