Refund claim restored as appellate authority wrongly ignored CBIC circular extending limitation for taxes paid under incorrect GST head

Case Reference

DMI Alternatives Private Limited v. Additional Commissioner, CGST Appeals-I, Delhi & Ors.
Delhi High Court
W.P.(C) 5412/2024
Category of dispute: Refund – tax paid under wrong head (IGST instead of CGST/SGST)
Date of judgment: 16 April 2024
Relevant statutory provisions: Sections 54 and 77 of the CGST Act, 2017; CBIC Circular dated 25.09.2021; Notification No. 35/2021-CT dated 24.09.2021

Facts

The petitioner, while filing Form GSTR-1 for November 2017, inadvertently declared intra-State supply of services as inter-State supply and discharged IGST instead of CGST and SGST (para 4). Upon realising the error, the petitioner subsequently paid the correct CGST and SGST, resulting in double payment of tax—once under IGST and again under CGST/SGST (para 5).

An initial refund application was filed on 11.05.2020, which was rejected vide order-in-original dated 28.11.2022 (paras 6–7). The appeal against the rejection was dismissed by the Appellate Authority solely on the ground of limitation, without examining the merits of the refund claim (para 1).

Questions for Consideration

Whether the Appellate Authority was justified in dismissing the refund appeal as time-barred by treating the date of payment of tax under the wrong head as the “relevant date”, despite the clarifications issued by CBIC vide Circular dated 25.09.2021 under Sections 54 and 77 of the CGST Act (paras 2, 8–11).

Observations of the Court

The Court examined Section 54 of the CGST Act, which prescribes a two-year limitation period from the “relevant date” for filing a refund application (para 8). It noted that the Appellate Authority erroneously treated the date of payment of IGST under the wrong head as the relevant date (para 9).

The Court relied heavily on CBIC Circular dated 25.09.2021, which clarified that in cases covered by Section 77 of the CGST Act, the relevant date for refund is the date of payment of tax under the correct head and not the date of payment under the incorrect head (paras 10–11). The circular further extended the limitation period by allowing refund applications to be filed within two years from 24.09.2021 where the correct tax had been paid prior to issuance of Notification No. 35/2021-CT (para 11).

On facts, the petitioner had paid IGST on 20.12.2017 and CGST/SGST on 19.08.2019 (para 12). Both refund applications—filed on 11.05.2020 and 14.07.2022—fell squarely within the extended limitation prescribed by the circular (paras 13–16). The Appellate Authority’s failure to consider the binding circular rendered its order legally unsustainable (para 16).

Judgment

The High Court set aside the appellate order dated 15.09.2023 and held that the refund applications were well within limitation as per CBIC Circular dated 25.09.2021 (para 16). The appeal was restored to the file of the Appellate Authority with a direction to adjudicate the matter on merits in accordance with law (para 16). Consequently, the writ petition was allowed (para 17).

Cases / Circulars Referred – Summary Table

Between the Fine Lines – Trade & Industry Takeaway

This ruling reinforces that refund claims arising from payment of GST under the wrong head are procedural in nature and must be examined pragmatically. Tax authorities cannot defeat substantive refund entitlements by mechanically invoking limitation, particularly when CBIC has clarified and extended timelines. Businesses that corrected IGST vs CGST/SGST errors prior to September 2021 retain a legally protected window to claim refunds, and appellate authorities are bound to apply departmental circulars in letter and spirit.

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