Limitation For Refund Of GST Is Determined From Date Of Original Application, Not From Date Of Follow-Up Application: J&K HC Quashes Deficiency Memo

In the case at hand, 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.

Significant to note that 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.

In the present case, 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.

However, on September 23, 2020, the Department issued a deficiency memo under Rule 90(3) of GST Rules, demanding supporting documents. It also 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 (September 08, 2020) and not the follow-up application, as the latter was a part of the original proceedings.

“Once the respondents had treated the original application dated 08.09.2020 as within time from the relevant date, then how the second application dated 28.09.2020, which was in continuation to the original application dated 08.09.2020 and was filed only on the advice of respondent No.2, became barred by limitation,” it said.

Reliance was placed on National Internet Exchange of India vs Union of India & ors (2023) where 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.

Similarly in Bharat Sanchar Nigam Limited vs Union of India & ors (2023), a division bench of the Delhi High Court held that merely because certain other documents or clarifications are sought by way of issuing a Deficiency Memo, the same will not render the application by a taxpayer as non est.

The Court also criticized the Revenue for rejecting the claim without providing an opportunity of hearing to the petitioner and imposed a cost on the Revenue. It said,

“Rule 92(3) specifically provides that no application for refund shall be rejected without giving the applicant an opportunity of being heard. Therefore, on this score alone the impugned deficiency memo requires to be quashed.”

Court also imposed a cost of Rs. 30,000 on the Department for wrongfully withholding the amount of tax paid in excess by the petitioner concern.

In conclusion, Court allowed Petitioner's writ petition and quashed the deficiency memo issued by Assistant Commissioner (GST).

It directed 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.

Appearance: Advocates Vishal Goel and Dinesh Dogra for Petitioner; Advocate Jagpaul Singh for Department

Case title: Hallmark v. Jammu & Kashmir GST Department & Anr.

Case no.: WP(C) No.2025/2020

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