2024 (1) TMI 1409 - HC - GST

Refund of tax paid under mistake - time limitation - rejection of refund only on the ground that the refund claims were filed by the petitioner are time barred beyond the statutory time period of two years as per Section 54(1) CGST Act - HELD THAT - The contention of the petitioner that the Section 54(1) of the CGST Act is not applicable in the facts of the case is not tenable in view of the fact that the petitioner is liable to pay the GST under the Act. However, in view of the Notification No. 32/2017, the petitioner was not granted exemption providing Nil rate of Tax . Therefore, as per clause(h) explanation 2, refund date would be the date of payment of tax, which petitioner has failed ignoring the Notification No. 32/2017. Therefore, the petitioner is ought to have filed refund claim as per the Section 54(1) of the CGST Act. This Court in the case of Joshi Technologies International 2016 (6) TMI 773 - GUJARAT HIGH COURT has held that the amount paid by mistake or through ignorance as self assessment of tax cannot be retained by the revenue and revenue is duty bound to refund as its retention is hit by Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. It was held that ' It appears that it is only sometime after the Education Cess and Secondary and Higher Secondary Education Cess came to be paid for the month of April 2014 that the petitioner came to know about its mistake and in July 2014, it filed the application for refund before the second respondent. Since the period of limitation begins to run only from the time when the applicant comes to know of the mistake, the application made by the petitioner was well within the prescribed period of limitation.' The amount of GST paid by the petitioner is admittedly paid as a self assessment, which the petitioner was not required to pay as per the Notification No. 32/2017. Accordingly, in the facts of the case, the amount paid by the petitioner from electronic cash ledger is required to be refunded by the respondent authority and could not have been rejected on the ground of limitation under Section 54(1) of the CGST Act. The impugned order dated 20.07.2021 passed by the Appellate Authority and Orders in Original dated 18.12.2020 passed by the adjudicating authority rejecting the claims of the petitioner are hereby quashed and set aside. All these matters are remanded back to the adjudicating authority to process the refund claims in accordance with law without considering the limitation period for filing the refund claim as prescribed under Section 54(1) read with explanation 2(h) of the CGST Act - petition allowed by way of remand.

Summary

Issues Involved:
1. Whether the refund claims filed by the petitioner are time-barred under Section 54 of the CGST Act.
2. Whether the tax paid by the petitioner under a mistaken belief of law should be refunded.
3. Applicability of Article 265 of the Constitution of India concerning tax collected without authority of law.
4. Impact of Notification No. 32/2017 and subsequent notifications on the petitioner's tax liability and refund claims.

Detailed Analysis:

1. Time-barred Refund Claims:
The petitioner filed refund claims for GST paid during the period from November 2017 to September 2018, which were rejected by the Assistant Commissioner, CGST, on the grounds that they were filed beyond the statutory time limit of two years as per Section 54(1) of the CGST Act. The Appellate Authority upheld this rejection, maintaining that the refund claims were governed by the time limitation prescribed under Section 54. The petitioner argued that since the tax was paid under a mistake of law, the limitation period should not apply.

2. Tax Paid Under Mistake of Law:
The petitioner contended that they were not liable to pay GST due to the exemption provided by Notification No. 32/2017, which specified a nil rate for services provided by a government entity to the government. The petitioner argued that the tax paid under a mistaken belief should be refunded as it was collected without authority of law, invoking Article 265 of the Constitution of India. The petitioner relied on precedents where courts have held that taxes paid by mistake should be refunded, as retaining such amounts would contravene constitutional mandates.

3. Article 265 of the Constitution of India:
The petitioner emphasized that Article 265 stipulates that no tax shall be levied or collected except by authority of law. The petitioner argued that since the tax was not legally due, it should be considered a deposit rather than a tax, and the government is obligated to refund it. The petitioner cited various judgments supporting the position that taxes collected without authority of law must be refunded, irrespective of statutory limitations.

4. Impact of Notifications:
The petitioner highlighted that Notification No. 32/2017, which amended the principal notification No. 12/2017, provided an exemption for the services rendered by the petitioner, thereby negating the tax liability. The petitioner also referred to Notification No. 13/2022, which extended the period for filing refund claims by excluding the period from March 1, 2020, to February 28, 2022, from the computation of the limitation period. The petitioner argued that this extension should apply to their refund claims, making them timely for certain periods.

Conclusion:
The court acknowledged that the petitioner was entitled to the exemption under Notification No. 32/2017 and that the tax paid was indeed under a mistaken belief. The court held that the amount paid by the petitioner from the electronic cash ledger should be refunded and that the rejection of refund claims on the grounds of limitation was not tenable. The court quashed the orders of the Appellate Authority and the adjudicating authority, directing them to process the refund claims without considering the limitation period under Section 54(1) of the CGST Act. The court emphasized that taxes collected without authority of law must be refunded, upholding the principles enshrined in Article 265 of the Constitution.