The Goods and Services Tax Appellate Tribunal (GSTAT), Delhi State Bench, has dismissed a departmental appeal concerning a ₹39.88 lakh refund claim, holding that the taxpayer’s original application, filed on February 29, 2024, was within the extended limitation period after applying the COVID-period exclusion.
The Bench of Sanjay Kumar Aggarwal, Vice President/Judicial Member, and Rajiv Kapoor, Technical Member (Centre), further observed that subsequent applications filed to rectify deficiencies were a continuation of the original, timely refund application. Their later filing dates could not independently render the claim time-barred.
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However, the bench clarified that the two-year limitation under Section 54(1) of the Central Goods and Services Tax Act, 2017 is a substantive statutory condition. Rectification of deficiencies cannot rescue a claim where the original application itself was filed beyond limitation.
The respondent/assessee received an advance of ₹7,11,67,068 in April 2020 and discharged GST of ₹1,28,10,072 while filing its GSTR-3B return for that month on May 19, 2020.
A portion of the advance, representing a taxable value of ₹4,90,09,353, was adjusted against actual supplies in June 2020. The company subsequently sought a refund of the remaining tax of ₹39,88,388, comprising CGST and SGST of ₹19,94,194 each.
The original refund application was filed on February 29, 2024. The department issued a deficiency memo in Form GST RFD-03 on March 12, 2024. The company submitted another application on March 31, 2024, followed by a second deficiency memo on April 10, 2024.
A third application was filed on May 25, 2024 and acknowledged on June 10, 2024.
On July 1, 2024, the department issued a show cause notice proposing rejection on limitation grounds and referring to missing supporting documents, including advance receipts, invoices, bank statements and a GST reconciliation sheet.
Although the company did not attend the hearing fixed for July 9, it filed a written reply on July 17, 2024. The adjudicating authority rejected the refund claim on July 22, 2024, solely on limitation grounds.
The Joint Commissioner (Appeals-II), CGST Delhi, annulled the refund rejection through an order dated April 30, 2025, on the ground of violation of natural justice. The department challenged that decision before GSTAT.
The Tribunal agreed that the adjudicating authority’s failure to deal with the taxpayer’s written reply violated natural justice. However, it found that the first appellate authority had not independently determined whether the refund application was within limitation.
Referring to Section 107(11) and (12), the Bench stressed that an appellate order must identify the points for determination, record its decisions and provide reasons.
Merely annulling the original order without deciding the central limitation issue left the substantive dispute unresolved. GSTAT therefore examined that question itself and ultimately upheld the annulment for the comprehensive reasons recorded in its own judgment.
The Tribunal treated May 19, 2020—the date of payment of GST—as the relevant date for the refund claim.
Notification No. 13/2022-Central Tax, dated July 5, 2022, excludes the period from March 1, 2020 to February 28, 2022 when computing limitation for refund applications under Sections 54 and 55.
Since the relevant date fell within this excluded period, the Tribunal held that no part of the taxpayer’s two-year limitation period had run before the exclusion ended. The full two-year period consequently became available from March 1, 2022.
Applying the calendar-year approach under the General Clauses Act, the Bench explained that the two years beginning on March 1, 2022 comprised the period up to February 29, 2024, inclusive. The leap day formed part of the second year.
Accordingly, the original refund application was filed on the final permissible day and was within time.
The Tribunal rejected the department’s contrary computation. It also declined to apply the Andhra Pradesh High Court decision in M/s MC Wane India Private Limited v. State of Andhra Pradesh & Others in the manner urged by the department, relying on its interpretation of the Supreme Court’s COVID limitation directions and the notification.
On the effect of deficiency memos, GSTAT relied on the line of High Court decisions recognising that an application genuinely rectifying deficiencies continues the original refund claim.
The Tribunal observed, “a genuine, bona fide rectification of deficiencies carried out pursuant to a deficiency memo does not give rise to a fresh cause of action or a fresh limitation period; it relates back to and is treated as a continuation of, the original application.”
Consequently, the applications filed on March 31 and May 25, 2024 related back to the original application dated February 29, 2024. The deficiency memos had no independent bearing on limitation in the circumstances of the case.
The Bench nevertheless clarified that this principle operates only where the original application was filed within the statutory period.
It protects a timely claim from being treated as late merely because deficiencies were subsequently rectified. It cannot cure a limitation defect that already existed when the original application was filed.
The taxpayer also advanced the argument that the amount could be treated as a deposit outside the statutory limitation framework applicable to tax refunds.
The Tribunal rejected this contention and distinguished cases involving payments made under a mistake of law where the underlying supply was exempt or outside the levy, or where a voluntary payment was not towards tax, interest or penalty.
In the present case, GST was legally payable when the advance for taxable services was received and was discharged as tax through GSTR-3B. The refund arose only because supply subsequently did not materialise against part of the advance.
The Bench held that the payment did not cease to be tax merely because it was later described as a deposit. The refund claim therefore remained governed by Section 54.
The Tribunal also rejected the proposition that limitation could be disregarded as a minor procedural lapse.
It held that the two-year period under Section 54(1) is a substantive condition of eligibility enacted by Parliament. The principle that minor procedural errors should not defeat substantive relief could not override this statutory requirement.
However, that finding did not defeat the company’s claim because its original application was, on the Tribunal’s calculation, filed within the prescribed period.
GSTAT dismissed the departmental appeal and upheld the annulment of the July 22, 2024 refund rejection, substituting its own detailed reasoning for that of the first appellate authority.
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