Refund of GST Paid Twice Cannot Be Denied on Ground of Limitation: Orissa HC [Read Order]

In a recent ruling, the Orissa High Court held that refund of GST paid twice cannot be denied only on the ground of limitation because the State cannot keep tax which is not legally due under Article 265 of the Constitution.

Rajendra Narayan Mohanty filed a writ petition challenging the refund rejection order dated 22 October 2025 passed in Form GST RFD-06 by the Joint Commissioner of State Tax.

A proceeding under Section 74 was started on 1 December 2020 after scrutiny of returns. The department found that the petitioner had received TDS credit in some months, but filed GSTR-3B showing NIL liability. A show cause notice was issued on 2 February 2022.

The petitioner replied that he had already paid the tax through DRC-03 dated 8 February 2021 using credit ledger, and later paid interest also. But later, due to wrong advice, he again paid the same amount through DRC-03 using cash ledger. This resulted in double payment of Rs.6,01,645 each under CGST and SGST.

The department dropped the Section 74 proceeding and accepted the compliance as genuine. After that, the petitioner applied for refund in RFD-01 for a total of Rs.12,03,290. The department issued RFD-08 and then rejected the refund saying it was filed beyond time limit under Section 54.

The petitioner’s counsel argued that the department itself accepted the double payment, so they cannot keep the extra amount. The State counsel argued that refund is time barred under Section 54.

The Division Bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that the rejection order itself recorded that the petitioner had paid the tax liability once through DRC-03 and again. The court also observed that the remark in the rejection order stating “no supporting documents attached” was not correct, as the petitioner had enclosed both DRC-03 forms and other documents with the refund application.

The court explained that once it is established that the taxpayer deposited the same tax twice under a mistaken notion, the State cannot retain such amount because it would offend Article 265 of the Constitution which prohibits collection and retention of tax without authority of law.

The court pointed out that the limitation under Section 54 cannot be applied mechanically in such cases where the amount is clearly paid under mistake and retention would be unconstitutional.

During hearing, the State’s counsel attempted to rely on another clause of the Explanation to Section 54 but the court observed that the rejection order was passed on a specific ground, and the department cannot support it later by taking new grounds. The court relied on the principle laid down in Mohinder Singh Gill that an order must be judged only on the reasons recorded in it.

The court held that the refund rejection order could not be sustained and quashed the same.

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