2025 (10) TMI 595 - HC - GST

Quashed rejection; rectified RFD-03 refund application restored for fresh merit consideration, excluding time until deficiency memo from two-year limit

M/s Varidhi Cotspin Private Limited Versus Union of India And Ors.

HC allowed the petition, quashing the order rejecting the refund application as time-barred and restoring the rectified refund application for fresh ... Rectified refund application filed after issuance of a deficiency memo under Rule 90(3) of the CGST Rules - subsequent to the refund application triggered with deficiency memo issued in Form RFD-03 is merely continuation of proceedings or fresh cause - HELD THAT:- In the instant case, the first deficiency memo was issued on 09.01.2020. It is therefore clear that time period from the date of filing of the refund claim in Form GST RFD-01 till the date of communication of the deficiency in the Form of GST RFD-03 by the proper officer is required to be excluded from the period of two years, as specified in respect of any such fresh refund claim filed by the applicant after rectification of the deficiency. However the issue is no more res integra with the decision of this Court in case of M/s. La-Gajjar Machineries Private Limited v. Union of India & Ors. [2023 (9) TMI 1518 - GUJARAT HIGH COURT] where it was held that 'The impugned order dated 9th November 2020 passed by the respondent No. 4 – The Joint Commissioner (Appeals) confirming the order dated 11th March 2020 passed by the Deputy Commissioner, Central GST, Division-I, Ahmedabad-South rejecting the application for refund filed by the petitioner on the ground of limitation is hereby quashed and set aside.' In view of the decision rendered by this Court in M/s. La-Gajjar Machineries Pvt. Ltd., the petition succeeds. The impugned order dated 24.11.2023 passed by the respondent rejecting the application of refund in Form RFD-06 filed by the petitioner on the ground of limitation is hereby quashed and set aside. The third rectified refund application dated 16.08.2023 is restored for consideration of the proper officer afresh on merits. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a rectified refund application filed after issuance of a deficiency memo under Rule 90(3) of the CGST Rules constitutes a fresh application for the purpose of computing the two-year limitation under Section 54(1) of the CGST Act, or is a continuation of the original application such that limitation is reckoned from the date of the original filing. 2. Whether the period from the date of filing of the refund claim in FORM GST RFD-01 until the date of communication of deficiencies in FORM GST RFD-03 by the proper officer must be excluded from the two-year limitation under Section 54(1) when a rectified/fresh refund application is filed after rectification. 3. Whether reliance on administrative Circular No.125/44/2019-GST (para 12) to reject a refund on limitation grounds is tenable where the proviso to Rule 90(3) (Notification No.15/2021) and the statutory scheme indicate otherwise. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Continuation vs. Fresh Application for Limitation Legal framework: Section 54(1) CGST Act prescribes refund application within two years from the relevant date; Rule 90(3) CGST Rules provides that upon communication of deficiencies the proper officer may require filing of a fresh refund application after rectification; Rule 89(2) prescribes documentary requirements making an application complete. Precedent treatment: Decisions of higher and coordinate courts (e.g., National Internet Exchange of India and subsequent High Court rulings) hold that where an application is complete in terms of Rule 89(2) the limitation period stops on original filing and a mere deficiency memo seeking further documents does not render the original application non est for limitation purposes. Interpretation and reasoning: A contextual reading of Rule 90(3) with Rule 89 indicates deficiencies that render an application incomplete are distinct from further verifications or demands for additional documents. If the original filing satisfied the documentary requirements of Rule 89(2), the application cannot be ignored for limitation purposes merely because the officer later seeks clarifications. Treating every rectified filing as a wholly fresh cause would frustrate the objective of Section 54(1) and deny taxpayers the protection of the original filing date where the filing was in 'form and manner' prescribed. Ratio vs. Obiter: Ratio - where an original refund application meets Rule 89(2) requirements, subsequent rectifications do not reset limitation and the time stops running on the date of original filing. Obiter - observations on hypothetical categories of deficiencies not falling within Rule 89(2) where fresh filing might be necessary. Conclusion: Rectified refund applications filed in continuity of an original application that was complete within Rule 89(2) are to be treated as continuation for limitation purposes; they do not attract a fresh two-year limitation period counted from the rectified filing. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Exclusion of Period Between Filing and Deficiency Communication Legal framework: Proviso inserted to Rule 90(3) by Notification No.15/2021 expressly provides that the period from filing FORM GST RFD-01 till communication of deficiencies in FORM GST RFD-03 shall be excluded from the two-year period for any fresh refund claim filed after rectification. Precedent treatment: High Court and Delhi/Bombay decisions interpret the proviso as clarificatory, aligning Rule 90(3) with Section 54(1) so that the running of limitation is suspended while the application remains under deficiency notice. Interpretation and reasoning: The proviso is clarificatory and effectuates the legislative intent of Section 54(1). Excluding the interval between initial filing and deficiency communication prevents penalizing taxpayers for time consumed in official processing and aligns procedural rule with statutory limitation. Calculation of excluded days must be factual and applied to the two-year limitation to determine whether rectified filing falls within time. Ratio vs. Obiter: Ratio - the period from initial filing to deficiency communication must be excluded from the two-year limitation when a rectified/fresh claim is filed after rectification; application of the proviso is mandatory where facts fit. Obiter - numerical examples and calculation methods for exclusion. Conclusion: Notification No.15/2021's proviso to Rule 90(3) applies and the exclusion of the period between original filing and deficiency communication must be applied in computing the two-year period; where so computed the rectified filing falls within limitation, the claim cannot be rejected on limitation grounds. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Applicability of Administrative Circular (Para 12) and Compatibility with Statutory Scheme Legal framework: Administrative circulars/guidelines must operate consistent with statutory provisions and rules; Section 54(1) and Rule 90(3) (with proviso) govern limitation and treatment of rectified applications. Precedent treatment: Courts have held that administrative instructions cannot be applied in a manner contrary to clear statutory provisions or rules interpreted by courts - reliance on circulars to deny substantive statutory rights is impermissible. Interpretation and reasoning: Where the statutory scheme and Rule 90(3) (as clarified by Notification No.15/2021) indicate that initial filing and the excluded period protect the taxpayer's right to claim refund, administrative circular clauses cannot be invoked to bypass that protection. If the circular would preclude allowance of a refund by compelling the appellate authority to reject on limitation even where exclusion applies, such reliance is unsustainable. Ratio vs. Obiter: Ratio - administrative circular cannot override or be applied inconsistent with the statutory exclusion under Rule 90(3) proviso and Section 54(1). Obiter - remarks on the non-pressing of challenge to the circular by the petitioner and on administrative practice. Conclusion: Clause relied upon in the administrative circular is not applicable to deny a refund where statutory rules and their proviso (Notification No.15/2021) demonstrate that the rectified filing is within the prescribed limitation; circular cannot be used to defeat such statutory protection. DISPOSITION AND RELIEF - COURT'S CONCLUSIONS 1. The impugned order rejecting the refund on the ground of limitation is quashed and set aside. 2. The rectified refund application is restored for fresh consideration on merits by the proper officer. 3. The proper officer is directed to consider the refund claim in accordance with law, applying the exclusion under the proviso to Rule 90(3)/Notification No.15/2021 and the principles stated, and to complete adjudication within 12 weeks from receipt of the order. 4. Rule made absolute to the stated extent; no order as to costs.