Limitation for GST Refund is to be Determined From Date of Original Application: J&K HC Quashes Deficiency Memo [Read Order]

In a recent case, the Jammu and Kashmir and Ladakh High Court has held that the limitation period for refund of GST is to be determined from the date the original application is filed by an assessee, and quashed the deficiency memo.

Hallmark,  the Petitioner, a garment manufacturer, was issued a deficiency memo and the follow up application, which it had filed for GST refund at the advice of the Department, was rejected as time barred.

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The original application seeking refund of tax paid-in-excess was filed well within limitation prescribed under Section 54 of Central Goods and Services Tax Act, 2017. The provision stipulates that the limitation to file the refund application is two years from the relevant date. The petitioner concern had filed the final GST return on September 09, 2018. Therefore, the application for refund of tax was to be filed before the expiry of two years from the relevant date, i.e., by September 19, 2020.

The Petitioner filed an application under Rule 89 of GST Rules 2017 for refund on September 08, 2020. The application was supported by returns for January, February, March, June, July & August, 2018 as well as certificate of CA. The Department issued a deficiency memo under Rule 90(3) of GST Rules, demanding supporting documents.

It was advised the petitioner to file a fresh refund application after rectification of the deficiencies. The Petitioner then filed a fresh refund application on September 28, 2020. However, the same came to be rejected on the ground of limitation.

The division bench of then Acting Chief Justice Tashi Rabstan and Justice Puneet Gupta held that the time limit for the refund should be determined from the date of original application and not the follow-up application, as the latter was a part of the original proceedings.

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The bench viewed that in National Internet Exchange of India vs Union of India & ors (2023) the Delhi High Court held that in terms of Section 54(1) of the CGST Act, the period of limitation would stop running notwithstanding that the proper officer required further documents or material to satisfy himself that the refund claimed was due to the petitioner.

The Court criticized the act of Revenue for rejecting the claim without providing an opportunity of hearing to the petitioner and imposed a cost on the Revenue. The Court further imposed a cost of Rs. 30,000 on the Department for wrongfully withholding the amount of tax paid in excess by the petitioner concern.

It was  directed by the J&K Tax Department, particularly Assistant Commissioner (GST), to process and release the GST refund of petitioner along with interest at the rate of 7% from the date the same fell due to the petitioner concern till the date of its final realization.

To Read the full text of the Order CLICK HERE

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