Karnataka HC Condones 6 Months Delay in GST Refund, Notes Relief Available in Genuine Cases [Read Order]

In a recent ruling, the Karnataka High Court condoned a delay of around six months in filing a GST refund claim and granted relief in a genuine case.

The case started when Merck Life Science Pvt. Ltd. paid IGST on some transactions by treating them as export of services for October 2017. Later, in March 2018, the company treated the same transactions as intra-State supply and paid CGST and SGST. Because of this, tax was paid twice on the same transaction.

The company filed a refund application on 30 March 2024 under Section 54 of the CGST Act. The department rejected the claim on 27 May 2024 saying that it was filed after the time limit, relying on Rule 89(1A) and Notification dated 24 September 2021.

The Single Judge allowed the writ petition and held that the time limit under Section 54 was not mandatory and refund should not be denied only because of delay when tax was wrongly paid.

The Revenue argued this order before the Division Bench.

The Division Bench comprising Justice S.G. Pandit and Justice K.V. Aravind observed that the two-year time limit under Section 54 is mandatory and binding on the authorities. The Court explained that GST law is time-bound and limitation cannot be treated as optional.

At the same time, the court observed that there is no provision in the Act to condone delay in refund claims. It pointed out that in such cases, the assessee can approach the High Court under Article 226.

The court also observed that Article 265 says that no tax can be collected without authority of law, so a genuine refund claim should not be rejected only on technical delay when there is no remedy in the law.

On facts, the court observed that even under the special window given by Rule 89(1A), the refund should have been filed within two years from 24 September 2021. But the assessee filed it on 30 March 2024, so there was a delay of about six months.

The court observed that the department did not dispute the refund on merits and the delay was small. So, it treated this as a fit case to condone the delay.

The High Court partly allowed the appeals, set aside the Single Judge order to some extent, condoned the delay, and directed the authorities to consider the refund claim as per law within 60 days.

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