Clarification on relevant date to be considered as per Sec 54., Goods and Services Tax - GST

[GAURAV SHARMA]

The RTP had paid taxes through electronic credit ledger by filing GSTR-3B returns for the FY 2021-22 whereas as per Rule 86(b), they were required to pay 1% of the tax liability through the electronic cash ledger.

Now, in FY 2024-25 during the audit conducted u/s 65, the department pointed out this discrepancy and henceforth, RTP made the relevant payment of 1% through DRC-03.

And subsequently filed for a refund of the excess taxes paid on this account. However, the department issued a RFD-08 (SCN) stating that the refund application is time-barred since, the relevant date for calculating the 2-year limitation period under Section 54 is the date of payment of taxes (GSTR-3B - filing date) for the concerned periods i.e the date when the original return for the period was filed.

We are of the view that the date of actual payment through DRC-03 should be considered the relevant date, as this is the point of incidence at which excess payment of taxes arose.

Posts / Replies

[KASTURI SETHI]

Why are you not satisfied with the replies against Issue ID  119583  ?

[KASTURI SETHI]

This refund claim cannot be treated as time barred but relief/justice is possible after litigation. I agree with your view that the date of excess payment is the date of DRC-03.

         How the payment in excess is caused ?  This is the most crucial question here. The cause of action is the date of DRC -03.  Prior to the date of payment via DRC-03,  the issue was not in picture. It was absent. So the date of payment via DRC-03 causes the excess payment.  

[KASTURI SETHI]

I intend to  further clarify. 

The variables,  'cause'  and   'result' are integrally correlated. Here DRC-03 is  'çause' and   excess  payment is the 'result'. If independent variable (cause) is absent, then dependent variable (result) will also be absent. 

                               This is how the date of deposit of tax via DRC-03 becomes the relevant date and is covered under Explanation (2) (h) to Section 54 of CGST Act. So not time barred at all.

[Sadanand Bulbule]

Well said Sir.

[YAGAY andSUN]

Based on the information you've shared, here's an analysis of the situation concerning the refund application and the applicability of the two-year limitation period under Section 54 of the CGST Act, 2017.

🧾 Scenario Overview

• Tax Payment Issue: The Registered Taxpayer (RTP) initially paid taxes through the electronic credit ledger by filing GSTR-3B returns for FY 2021-22. However, as per Rule 86(b), they were required to pay 1% of the tax liability through the electronic cash ledger.

• Rectification: In FY 2024-25, during an audit under Section 65, the department pointed out this discrepancy. The RTP subsequently made the required payment of 1% through DRC-03.

• Refund Application: The RTP then filed for a refund of the excess taxes paid. However, the department issued a Show Cause Notice (SCN) under RFD-08, stating that the refund application is time-barred since the relevant date for calculating the two-year limitation period under Section 54 is the date of payment of taxes (GSTR-3B filing date) for the concerned periods.

• RTP's Position: The RTP contends that the date of actual payment through DRC-03 should be considered the relevant date, as this is when the excess payment of taxes occurred.

⚖️ Legal Analysis

1. Relevant Date for Refund Under Section 54

Section 54(1) of the CGST Act stipulates that a refund application must be made within two years from the "relevant date." The Act provides specific provisions to determine the relevant date for various situations.

• Rule 89(2) of the CGST Rules specifies that the relevant date for claiming a refund of any tax paid is the date of payment of tax.

• In the scenario at hand, the RTP initially paid the tax through the electronic credit ledger. The subsequent payment through DRC-03 was made to rectify the earlier payment method. Therefore, the date of payment through DRC-03 could be considered the relevant date for the purpose of calculating the limitation period for the refund application.

2. Judicial Precedents

While there may not be a directly applicable case law on this specific issue, judicial interpretations have emphasized the importance of the actual date of payment in determining the relevant date for refund claims.

• Madras High Court in Lenovo (India) Pvt. Ltd. v. Joint Commissioner: The court observed that the time limit under Section 54(1) is directory in nature and not mandatory. It held that in appropriate cases, a refund application can be made even beyond two years, especially when the delay is due to circumstances beyond the taxpayer's control. Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST Citation:W.P.Nos.23604, 23605, 23607 of 2022, High Court of Judicature at Madras, dated 3rd January 2024.

📝 Conclusion

Given the circumstances:

• The RTP's initial payment through the electronic credit ledger was not in compliance with Rule 86(b), necessitating the subsequent payment through DRC-03.

• The actual payment through DRC-03 rectified the earlier non-compliance and should, therefore, be considered the relevant date for calculating the two-year limitation period under Section 54.

• Judicial precedents support the view that the actual date of payment is pivotal in determining the relevant date for refund claims.

Therefore, the RTP's refund application should not be considered time-barred, and the department should process the claim accordingly.

[YAGAY andSUN]

Here's a draft of your legal response in core legal language suitable for replying to the Show Cause Notice (RFD-08) or for use in a representation:

Re: Reply to SCN in Form RFD-08 – Regarding Refund Claim on Excess Tax Paid – Determination of "Relevant Date" under Section 54 of the CGST Act, 2017

Respected Sir/Madam,

This is in reference to the Show-Cause Notice issued in Form RFD-08 wherein it has been alleged that the refund application filed by the Registered Taxable Person (RTP) is time-barred in terms of Section 54 of the Central Goods and Services Tax Act, 2017 ("the Act") on the ground that the "relevant date" for computing the period of limitation is the date of filing of the GSTR-3B returns for the relevant periods of FY 2021-22.

At the outset, it is submitted that the refund pertains to the excess tax paid by the RTP through the electronic credit ledger instead of the mandatory 1% payment through the electronic cash ledger as per Rule 86B of the CGST Rules, 2017, which came to light only upon audit under Section 65 of the Act during FY 2024-25. Pursuant to such audit, and upon identification of such shortfall in compliance, the RTP, in good faith and without contest, discharged the requisite liability through the filing of Form DRC-03 and subsequently filed the refund claim for the corresponding excess amount earlier paid through the credit ledger.

Legal Submissions:

1. Determination of "Relevant Date": Under clause (h) of Explanation (2) to Section 54 of the Act, the relevant date in cases not specifically covered under clauses (a) to (g) may be construed as the date of payment of tax. In the present case, the liability under Rule 86B arose only upon the audit finding, and the actual incidence of excess payment of tax (via credit ledger) became crystallized on the date the payment through DRC-03 was made in FY 2024-25. Therefore, the “relevant date” for the purposes of Section 54(1) should be reckoned from the date of payment through DRC-03, which is the date on which the RTP fulfilled the shortfall and the excess payment, by consequence, became ascertainable.
2. Principle of Unjust Enrichment and Substantive Right of Refund: Denying refund on a technical ground of limitation—when the excess payment arose only upon subsequent detection and corrective action—is inconsistent with the legislative intent behind Section 54, which is to prevent unjust enrichment and to ensure restitution in bona fide cases. It is trite law that limitation provisions must be construed strictly, but the computation thereof must align with the actual cause of action and not a notional or unrelated date.
3. Case Law Support: Judicial precedents, including those under the erstwhile tax regimes, support the view that the “relevant date” for limitation under refund provisions must be reckoned from the date when the taxpayer became entitled to claim the refund. Reference may be made to:
   • Union of India vs. ITC Ltd. [(2004) 7 SCC 591],
   • Ranbaxy Laboratories Ltd. vs. Union of India [2011 (273) E.L.T. 3 (S.C.)], which emphasize that the limitation period under refund claims should begin from the date of payment of duty/tax under protest or subsequent rectification.
4. Doctrine of Substantial Justice: It is a well-settled principle that procedural technicalities should not override the right to substantive justice, particularly in tax matters where the taxpayer has complied in good faith and no revenue loss has occurred. The RTP has not contravened the tax provisions with any malafide intent but has duly rectified the same upon identification and now seeks refund of the consequential excess payment.

Conclusion:

In light of the foregoing submissions, it is respectfully prayed that the refund application may kindly be held as filed within the statutory period as per Section 54(1) of the CGST Act, reckoning the relevant date from the date of payment through DRC-03, and the SCN issued in Form RFD-08 may be dropped accordingly.

Yours faithfully,
[Authorized Signatory]
[Designation & Details of RTP]
[Date]

Annexures (If any)

1.

2. 

[YAGAY andSUN]

 

✅ Relevant Provision: Explanation (2)(h) to Section 54 of the CGST Act, 2017. Let’s break it down with the correct legal provision to support your argument:

Text of the Law:

“In the case of any other refund, the relevant date shall be the date of payment of tax.”

🔍 Application to Your Case

• In your case, the tax paid through DRC-03 was made after the original GSTR-3B was filed, and was made voluntarily to rectify the non-compliance pointed out during the audit.

• This payment constitutes a fresh incidence of tax paid, specifically falling under the scope of Explanation (2)(h), which deals with “any other refund” scenarios not expressly covered under other clauses (like exports, inverted duty, etc.).

• Therefore, the date of payment through DRC-03 becomes the "relevant date" for the purpose of computing the 2-year time limit under Section 54(1).

🧾 Conclusion

Since the tax was actually deposited via DRC-03 in FY 2024-25, and the refund was claimed within two years from that date:

➡️ The refund is not time-barred.
➡️ The issuance of RFD-08 SCN claiming limitation is not tenable in law.

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