Refund of GST Pre-Deposit made u/s 107(6)(b) cannot be Denied on Grounds of Limitation: Jharkhand HC [Read Order]

In a recent ruling, the Jharkhand High Court ruled that it is constitutionally untenable to deny a refund claim for a statutory pre-deposit made under Section 107(6)(b) of the  Goods and Service Tax (GST) Act, 2017, on the grounds that it was submitted beyond the two-year statute of limitations under Section 54(1).

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The petitioner, BLA Infrastructure Private Limited, is a registered dealer under the Goods & Services Tax Act and engaged in the loading, unloading, and transportation of coal into tippers. Alleging a discrepancy between GSTR-1 and GSTR-3B for the month of September 2019, a Show Cause Notice was issued under Section 74 of the JGST Act, 2017 in January 2021. An ex-parte order was issued via order dated August 31, 2021, imposing a liability of Rs. 16,90,442/-, which included tax, interest, and penalty, among other things.

The petitioner filed an appeal within the allotted time, submitting a statutory pre-deposit of 10% of the contested tax amount under Section 107(6)(b) of the Act to sustain the appeal, which was later granted.

The petitioner then requested a refund of the pre-deposit sum, which was, according to a Deficiency Memo, determined to have exceeded the time frame allowed by section 54(1) of the Goods & Services Tax Act. Disappointed, the petitioner then filed a case in the High Court.

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In their counter-affidavit, the respondents defended the Department's actions allegedly in accordance with Section 54 and cited a circular from the Government of India's Ministry of Finance, GST Policy Wing, which declared the application to be time-barred and further stated that the Jurisdictional Officer lacked the authority or discretion to excuse the delay.

"It is not even a case that there is any unjust enrichment on the part of the assessee, insofar as the pre-deposit was made from the assessee's own pocket, and restricting the refund in reading the word'may' as'shall' would be unreasonable and would otherwise be arbitrary and in conflict with the Limitation Act, 1963," the Court said, rejecting the same.

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The Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan held that there is no dispute to the effect that once refund is by way of statutory exercise, the same cannot be retained neither by the State, nor by the Centre, that too by taking aid of a provision which on the face of it is directory, inasmuch as, the language couched in Section 54 is 'may make an application before the expiry of 2 years from the relevant date.

The court held that the action of the respondents in rejecting the refund application considering it as time barred has no legs to stand in law and accordingly, the rejection order by way of Deficiency Memo dated 06.11.2024, is hereby, quashed and set aside.

Consequently, the Court allowed the writ petition, and directed the Department to process the refund with applicable statutory interest within six weeks.

To Read the full text of the Order CLICK HERE

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