Refund applications and Covid-19 limitation exclusion: records show timely filing, so time-bar rejection order set aside

Refund claims were rejected as time-barred. The HC held that the authority misapplied limitation by ignoring undisputed record showing the claimant had filed refund applications within the prescribed period, including an application filed on the very date the authority stated was the deadline. The HC further held that the statutory exclusion of time arising from the SC's Covid-19 limitation extension, as operationalised through the relevant notification, had to be applied, and its non-consideration rendered the rejection contrary to the Act and the material on record. Consequently, the impugned order was set aside, and the refund applications were held to be within limitation, with the petition allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether rejection of the refund claim as time-barred was sustainable when earlier refund applications for the relevant tax periods had been filed within the prescribed time, including an application filed on the very date treated as the last permissible date by the authority.

(ii) Whether the authority erred in not granting the benefit of exclusion of time on account of COVID-related relaxation (as referred to in the impugned order) while computing limitation for the refund claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of rejection as time-barred in light of earlier in-time applications

Legal framework (as discussed by the Court/authority): The impugned order proceeds on the basis that the refund application was filed under the provisions referred to therein (including the provision invoked for refund and the rule prescribing a two-year period), and computes a last date for filing by applying the time-limit approach adopted by the authority.

Interpretation and reasoning: The Court treated it as an undisputed factual position that a refund application had been filed on 09.05.2023 for the period January-2019 to March-2021 and that it was within limitation. The Court found that this application was not considered while passing the impugned order. The Court further noted that, even on the authority's own reasoning in the impugned order (which identified 28.02.2024 as the relevant outer date), the record showed that the claimant had in fact filed a refund claim on 28.02.2024 itself, which also was not considered while rejecting the claim as time-barred. On this basis, the Court held that rejection on limitation ignored material record and was erroneous.

Conclusions: The Court held that the refund claims made through multiple applications commencing from 09.05.2023 up to 03.02.2025 were not barred by limitation. The impugned rejection on limitation was therefore set aside, and limitation was directed to be treated as concluded in favour of the claimant.

Issue (ii): Non-consideration of COVID-related exclusion of time while computing limitation

Legal framework (as discussed by the Court/authority): The impugned order itself referred to a COVID-related relaxation/exclusion of time (excluding the period from March-2020 to February-2022) for computing limitation for filing refund applications.

Interpretation and reasoning: The Court held that the authority, having referred to the exclusion, nevertheless failed to consider or appreciate that such exclusion would enure to the benefit of the claimant. The Court found the refusal to extend the benefit of the stated exclusion resulted in an erroneous conclusion that the claim was time-barred, and that this was contrary to the law and the material on record.

Conclusions: The Court concluded that computation of limitation in the impugned order was legally flawed due to failure to give effect to the exclusion of time, contributing to the incorrect rejection as time-barred.

Relief and operative directions (material to decision)

The Court set aside the impugned order rejecting the refund as time-barred, held that limitation stood concluded in favour of the claimant, and directed the authorities to consider the refund claim on merits and pass appropriate orders together with applicable interest, within three months, without reference to limitation.

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