Refund claim restored as limitation was wrongly computed ignoring CBIC circular clarifying relevant date for wrongly paid IGST

Case Reference

DMI Alternatives Private Limited v. Additional Commissioner CGST Appeals-1 Delhi & Ors.
Delhi High Court
W.P.(C) 5412/2024
Category of dispute: Refund of tax wrongly paid under incorrect head (IGST vs CGST/SGST)
Date of judgment: 16 April 2024

Facts

(Paras 4–7, 12–15)

The petitioner, DMI Alternatives Private Limited, while filing Form GSTR-1 for November 2017, erroneously disclosed intra-State supply of services as inter-State supply, resulting in payment of IGST instead of CGST and SGST. Upon realization of the error, the petitioner corrected the classification and discharged the appropriate CGST and SGST liability, thereby leading to double payment of tax—once under IGST and again under CGST/SGST.

Subsequently, the petitioner filed a refund application on 11.05.2020, which was rejected by an order-in-original dated 28.11.2022. The appeal preferred against the rejection was dismissed by the Appellate Authority on 15.09.2023 solely on the ground that the refund claim was barred by limitation under Section 54 of the CGST Act, 2017.

Questions Before the Court

(Paras 8–11)

Whether the Appellate Authority was justified in dismissing the appeal as time-barred by treating the date of payment of tax under the wrong head as the “relevant date”, ignoring the CBIC Circular dated 25.09.2021 issued under Section 77 of the CGST Act, 2017.

Observations of the Court

(Paras 9–16)

The Court examined Section 54 of the CGST Act, 2017, which prescribes a two-year limitation period for filing refund claims from the “relevant date”. It noted that ambiguity had existed as to whether, in cases of tax paid under the wrong head, the relevant date should be the date of such wrong payment or the date when tax was paid under the correct head.

The Court relied upon CBIC Circular dated 25.09.2021, which clarified that in cases covered under Section 77 of the CGST Act, the relevant date for computing limitation would be the date of payment of tax under the correct head. Further, the circular granted an extended window of two years from 24.09.2021 for taxpayers who had already paid tax under the correct head prior to issuance of Notification No. 35/2021 dated 24.09.2021.

Applying this clarification, the Court observed that both refund applications filed by the petitioner—one in May 2020 and the subsequent one in July 2022—were well within the limitation period as clarified by the circular. The Appellate Authority, therefore, erred in dismissing the appeal by mechanically adopting the date of wrong IGST payment as the relevant date and by completely ignoring the binding clarification issued by the CBIC.

Judgment

(Paras 16–17)

The Delhi High Court held that the impugned appellate order rejecting the refund appeal on the ground of limitation was legally unsustainable. The order dated 15.09.2023 was set aside, and the appeal was restored to the file of the Appellate Authority. The Appellate Authority was directed to adjudicate the appeal afresh on merits in accordance with law. The writ petition was accordingly allowed.

Statutory Provisions Involved

Cases Referred – Summary

Between Fine Lines – Practical Takeaway for Trade & Industry

This judgment reinforces that refund claims arising from tax paid under the wrong GST head must be examined in light of CBIC Circular dated 25.09.2021. Authorities cannot mechanically reject refunds as time-barred by reckoning limitation from the date of wrong payment. For taxpayers who corrected the tax head prior to September 2021, a statutory extension up to September 2023 is available, and denial of refund on limitation alone would be legally untenable.

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