The Gujarat High Court directed the refund of Rs. 40 lakh paid voluntarily as GST by the petitioner, declaring that the limitation under Section 54(1) of the GST Act, 2017 was inapplicable in this case.
The petitioner, Messrs Aalidhra Texcraft Engineers, is engaged in the manufacture of textile machines. The company had imported goods during the financial year 2019-2020, incurring import duties, including integrated tax, which was duly claimed as input tax credit ( ITC ). Due to a perceived mismatch in the ITC figures in their returns, they voluntarily deposited Rs. 40 lakh through Form DRC-03 in November 2020, believing they had erroneously claimed excess credit.
After the scrutiny by GST authorities in 2024 revealed that no such liability existed for the financial year 2019-2020. The petitioner then filed a refund application in March 2024, which was initially acknowledged but later rejected by the Assistant Commissioner of GST in June 2024 as it was time-barred under Section 54 (1 ) of the Act.
The petitioner’s counsel contended that the Rs. 40,00,000 deposited voluntarily in Form DRC-03 was not paid as tax or interest under Section 54 (1 ) of the Act, making the two-year limitation inapplicable.
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The High Court bench, after going through several judicial precedents, observed that the above case does not come under the purview of Section 54 as the petitioner has deposited voluntarily the amount of Rs. 40,00,000.
As the amount was deposited by the petitioner as a voluntary mistake, the bench directed the respondent authorities to refund the same.
The bench noted that the petitioner will not be entitled to the interest of the above-mentioned amount, as it was deposited voluntarily.
The bench, comprising Justice Bhargav D. Karia and Justice D.N. Ray, held that the refund claim should not be rejected due to the timeline prescribed in Section 54( 1 ) of the GST Act, as the amount was not deposited towards any tax, interest, or penalty but due to a mistaken belief.
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