The Goods and Services Tax Appellate Tribunal (GSTAT), Delhi State Bench, has held that limitation for claiming a refund of excess GST paid through monthly GSTR-3B returns must be calculated separately for each month. Consolidating earlier excess payments into a year-end claim cannot give those payments a fresh limitation period.

Deciding a departmental appeal concerning Union Bank of India’s refund claim of ₹1,35,34,594, the bench of  Sanjay Kumar Aggarwal (Vice President/Judicial Member) and Rajiv Kapoor, (Technical Member) rejected the bank’s contention that the entire amount should be treated as a March 2018 claim following annual reconciliation. However, it allowed relief for February 2018 by applying a separate COVID limitation exclusion.

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The respondent/assessee provides banking and other financial services, filed a refund application on May 6, 2020, seeking ₹1,35,34,594, comprising CGST and SGST of ₹67,67,297 each.

Although the application identified March 2018 as the tax period, the underlying claim concerned excess payments arising during July 2017 to March 2018. The bank maintained that earlier excess payments had been carried forward and that the unadjusted balance emerged upon reconciliation at the close of the financial year.

The original authority rejected the claim. It treated the claims for July 2017 to February 2018 as time-barred under the COVID relaxation notifications then considered. While accepting that the March 2018 claim was within time, it found no excess payment for that month.

The appellate authority subsequently allowed the bank’s appeal through an order dated November 3, 2021. It relied on COVID compliance relaxations and also found that the original authority had cited an irrelevant circular concerning liquor licence fees.

The department challenged that decision before GSTAT.

The bank argued that 2017-18 was the first year of GST and that the originally envisaged return and reconciliation framework had not become fully operational.

Relying on CBIC Circular Nos. 7/7/2017-GST and 26/26/2017-GST, it contended that differences relating to earlier months could be adjusted in subsequent returns, with a refund being claimed where adjustment was not feasible.

According to the bank, the excess therefore had to be considered cumulatively at year-end rather than as separate monthly refund claims. It also relied on annual return disclosures, administrative clarifications and the constitutional prohibition against retaining money collected without authority of law.

The department countered that clause (h) of the Explanation to Section 54 fixed the relevant date as the date of payment of tax. For the payments in question, this corresponded to the filing date of each monthly GSTR-3B.

The tribunal accepted the department’s position on the central limitation issue.

It held that excess tax paid through a particular month’s GSTR-3B carried its own relevant date, corresponding to the filing of that return. The two-year period under Section 54(1) consequently had to be examined separately for each month.

Describing the aggregate refund application as one for March 2018 did not change the dates of the underlying payments. Similarly, filing one application for a combined amount could not alter the relevant date applicable to each payment.

The bench also observed that the bank had not identified any return in which an earlier month’s differential had actually been reported on a net basis, despite its general assertion that corrections had been progressively carried forward.

GSTAT held that the circular permitting adjustment of earlier differences in subsequent returns did not extend the statutory refund period or postpone its commencement.

Where adjustment was not feasible and a refund was sought, the claim remained governed by Section 54.

The tribunal further rejected the proposition that the non-operationalisation of GSTR-3 suspended the limitation provision. Changes to the return-filing mechanism did not amend Section 54.

It explained that GSTR-9 summarised annual transactions, tax liabilities, payments and refunds. Annual disclosure did not create a fresh relevant date for seeking a refund of earlier monthly payments.

The bench found no foundation on the record for a legitimate expectation that limitation would begin only at year-end.

The tribunal distinguished between the COVID measures applicable to the claim.

Notification No. 35/2020-Central Tax, as amended by Notification No. 55/2020-Central Tax, covered specified deadlines falling within a window beginning March 20, 2020. These notifications did not revive claims whose limitation had already expired before that window opened.

On this basis, the claims for July 2017 to February 2018 were not saved by those notifications.

However, the tribunal held that the examination could not end there. It separately considered Notification No. 13/2022-Central Tax, which excluded March 1, 2020 to February 28, 2022 when computing limitation for refund applications under Section 54.

It also considered the Supreme Court’s January 10, 2022 order excluding March 15, 2020 to February 28, 2022 for judicial and quasi-judicial proceedings.

The bank had filed its February 2018 GSTR-3B on March 19, 2018. Its ordinary refund deadline therefore fell in March 2020, within the applicable exclusion periods.

Consequently, the refund application filed on May 6, 2020 was within time for February 2018.

The tribunal directed that the February 2018 refund be segregated from the consolidated claim, quantified and granted in accordance with law. Its operative directions did not quantify the relief.

By contrast, the claims for July 2017 to January 2018 had expired before the relevant exclusion periods began and remained time-barred.

The bank’s alternative reliance on Article 265 of the Constitution did not succeed on the record before the tribunal.

The bench distinguished judgments involving an unconstitutional levy, a mistaken voluntary deposit outside the return mechanism, or an established duplicate payment of the same tax liability.

In the present case, GST was chargeable on the bank’s services, and the disputed amounts had been paid as tax through GSTR-3B. The record disclosed differences between GSTR-3B and GSTR-1 attributed to corrections and reconciliation.

It did not establish an identified payment made without authority of law in the manner demonstrated in the authorities cited by the bank.

The tribunal therefore held that the bank had not established an exception to the statutory limitation period on the evidence available.

For March 2018, GSTAT confirmed that the refund application was within time under the 2020 relaxation notifications.

Nevertheless, the original authority’s working showed a negative excess-payment figure of ₹2,42,846 under each of CGST and SGST. The bank’s own statement also showed negative figures, although the amounts differed.

The tribunal explained that a negative excess-payment figure represented a shortfall rather than an excess. Accordingly, no refund was sanctionable for March 2018.

Earlier time-barred amounts could not be brought into that month’s refund claim merely by describing them as carried forward.

GSTAT set aside the appellate order to the extent discussed in its findings. The claims for July 2017 to January 2018 remained barred; February 2018 qualified for relief under the separate COVID exclusion; and March 2018 yielded no refund because no excess payment was shown.

There was no order as to costs.

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