The Andhra Pradesh High Court while setting aside defect memos issued by the GST department rejecting refund claims worth over Rs. 11.49 crore has held that there is no time limit on refund of mistaken GST payment.
The bench of Justice R Raghunandan Rao and Justice T.C.D.Sekhar has observed that refund cannot be denied on the ground of limitation when the tax itself was collected without authority of law.
The petitioner, NSPIRA Management, engaged in educational management and hostel services, had taken residential dwellings on rent to provide accommodation for students. Although renting of residential dwellings for use as residence is exempt under Entry No.12 of Notification No.12/2017–Central Tax (Rate) dated June 28, 2017, landlords had charged GST on the rent invoices. Consequently, the company paid tax and later sought refund of the amount wrongly paid.
Refund applications filed on May 1, 2024, and February 29, 2024, covering tax periods between July 2017 and June 2022, were rejected through defect memos dated May 21, 2024, citing expiry of the two-year limitation period under Section 54 of the CGST Act, 2017.
The petitioner argued that the rejection through defect memos violated due process under Rule 92(3) of the CGST Rules, which requires issuance of a show-cause notice and a speaking order. He further contended that refund claims cannot be denied on limitation grounds when the tax itself was collected without legal authority, as it violates Article 265 of the Constitution.
The department argued that refund claims must be filed within two years as per Section 54. Referring to Notification No.13/2022–Central Tax (excluding March 2020–February 2022 for limitation purposes), he argued that NSPIRA’s claims were filed beyond the permissible period.
The Court held that Section 54 applies only to refund of tax paid under lawful authority. Where tax is collected without authority of law, the refund must be governed by Section 17 of the Limitation Act, not the CGST Act. Relying on the Gujarat High Court ruling in Comsol Energy Pvt. Ltd. v. State of Gujarat, the Bench observed that the government cannot retain tax collected without authority merely because the refund application was delayed.
Setting aside the defect memos, the Bench directed the GST authorities to process NSPIRA’s refund applications without considering limitation, and pass appropriate orders within four weeks from receipt of the judgment.
Case Details
Case Title: M/S. Nspira Management Services Private Limited Versus Assistant/ Deputy Commissioner Of Central Tax
Case No.: Writ Petition Nos.18287 & 14905 Of 2024
Date: 26.09.2025
Counsel For Petitioner: Pasupuleti Venkata Prasad
Counsel For Respondent: Venna Hemanth Kumar
