The Delhi High Court has held that Goods and Service Tax (GST) is not payable by Delhi Metro Rail Corporation (DMRC) for the service of Project Report for Surat Municipal Corporation and refund under section 54 of Central Goods and Service Tax (CGST Act), 2017 not applicable where GST is not Charged.
The petitioner, DMRC has filed the present petition impugning an order (Order-in-Appeal No.241/2022-2023) dated 24.02.2023 passed by respondent no.1, whereby the DMRC’s appeal against an order dated 04.07.2022 passed by respondent no.2 was rejected.
The DMRC is, essentially, aggrieved by the denial of its claim for the refund of ₹2,90,520/- as deposited by it under a mistake. There is no dispute that the refund as claimed would be payable to the DMRC. However, its refund claim was rejected on the ground that the application for refund was filed beyond the period of two years as stipulated under Section 54(1) of the Central Goods and Services Tax Act, 2017 (the CGST Act).
The DMRC was engaged by respondent no.3 (Surat Municipal Corporation) for the preparation of a project report for the development of the Metro Rail Project for the City of Surat, Gujarat. In terms of its engagement, the DMRC rendered services for the preparation of a Detailed Project Report for the aforementioned project. And on 11.08.2017, raised an invoice of an amount of ₹19,04,520/- for the services rendered. The invoiced amount included Goods and Services Tax (GST) of ₹2,90,520/- computed at the rate of 18%.
Respondent no.3 paid an amount of ₹16,14,000/- against the said invoice but did not pay the amount of GST as included in the said invoice. To ensure that there is no failure in complying with its statutory provisions, the DMRC deposited a sum of ₹2,90,520/- with the GST Authorities for August 2017 (under Form GSTR-3B).
Thereafter, the DMRC was informed by respondent no.3 that in terms of Notification no.12/2017 – Central Tax (Rate) dated 28.06.2017 issued by the Ministry of Finance, Government of India, the services billed under the invoice dated 11.08.2017, were not chargeable to GST.
Thereafter on 02.05.2022, the DMRC applied for a refund (in Form GST RFD-01) before respondent no.2 for August 2017. However, the said application was rejected by an order dated 04.07.2022 on the ground that the application for refund was filed after the expiry of two years from the relevant date.
A plain reading of the decision of the Gujarat High Court in M/s Cosmol Energy Private Limited v. State of Gujarat indicated that the issue decided in the said case is similar to the one involved in the present case. The court had held that “Section 54 of the CGST Act is applicable only for claiming refund of any tax paid under the provisions of the CGST Act and/or the CGST Act. The amount collected by the Revenue without the authority of law is not considered as tax collected by them and, therefore, Section 54 is not applicable”
Mr. Tripathi, counsel appeared for the respondents, fairly stated that the Department has not filed any appeal against the decision of the Gujarat High Court in M/s Cosmol Energy Private Limited v. State of Gujarat.
“Concededly, GST is not payable by the DMRC in respect of the service of preparation of Detailed Project Report for respondent no.3. Thus, the amount of ₹2,90,520/- deposited by the DMRC on an erroneous belief that payment for services rendered by it was chargeable to tax, cannot be retained by the respondents.”, the Court held.
It was well settled that GST is an indirect tax. The burden of such tax is inevitably borne by the final recipient, then respondent no 3 would be liable to reimburse the GST chargeable on services availed by it. However, since GST is not payable in respect of such services, respondent no.3 has not paid the said amount.
A division bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed that the period of limitation for applying for a refund as prescribed under Section 54 of the CGST Act, would not apply where GST is not chargeable and it is established an amount has been deposited under a mistake of law.
The Court set aside the impugned order as well as the refund rejection order and directed the respondents to process the DMRC’s claim for a refund of ₹2,90,520/-.
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