The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has held that refund claims filed by the United Nations Children’s Fund (UNICEF) for IGST paid on imported goods were not barred by limitation, ruling that the limitation period could not commence before the Customs Department clarified the procedure for claiming such refunds through Circular No. 23/2019-Customs dated August 1, 2019.
The bench of Binu Tamta (Judicial Member) has observed that limitation had to be computed from the date of the 2019 Customs circular, coupled with the limitation extension granted during the COVID-19 period.
UNICEF, a specialised agency of the United Nations providing humanitarian and developmental assistance to children worldwide, had filed three refund applications on May 24, 2022, seeking refund of IGST paid on imports.
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The adjudicating authorities had considered Notification No. 16/2017-Union Territory Tax (Rate) and CBIC Circular No. 23/2019-Customs dated August 1, 2019, under which United Nations agencies were entitled to refund of IGST so as to maintain parity with exemptions available in respect of domestic taxes.
However, the IGST in question had been paid between November 17, 2017 and December 20, 2017, while the refund applications were filed nearly five years later, in May 2022. The department took the view that the claims were governed by the one-year limitation period under Section 55 of the CGST Act, 2017 read with Section 27 of the Customs Act, 1962.
On that basis, the refund claims were treated as time-barred.
The Commissioner (Appeals) subsequently rejected UNICEF’s appeals and confirmed refund-related amounts of ₹39,39,886, ₹5,62,139 and ₹44,48,101, relating to the periods October and December 2017 and January to June 2018 respectively.
The principal issue before CESTAT was whether the limitation period for claiming refund of IGST paid by a United Nations agency on imported goods could be reckoned from the dates on which the IGST was originally paid, or whether the limitation period would begin only from August 1, 2019, when CBIC issued Circular No. 23/2019-Customs clarifying the mechanism for processing such refund claims.
The issue was particularly significant because, according to UNICEF, there was no clear mechanism or designated authority for claiming refund of IGST paid on imports before the 2019 circular.
Appearing for UNICEF, the appellant’s consultant submitted that Section 55 of the CGST Act specifically entitled a specialised agency of the United Nations to claim refund in respect of eligible inward supplies, including imports.
The appellant relied upon Section 54(2) read with Section 55 of the CGST Act, 2017, submitting that the statutory framework governing refund claims had to be considered in the context of the actual mechanism available for filing the claim.
UNICEF further argued that, initially, the prescribed period for filing refund applications under Section 54(2) was six months from the relevant date, which was subsequently extended to 18 months by Notification No. 20/2018-Central Tax dated March 28, 2018.
A key submission was that there was no mechanism on the common GST portal for claiming refund of IGST paid on imports, unlike the mechanism available for other inward supplies.
According to UNICEF, it was only through CBIC Circular No. 23/2019-Customs dated August 1, 2019 that the Customs authorities were designated to process such IGST refund claims. Therefore, the appellant argued that the right to effectively claim the refund became actionable only after issuance of the circular.
On this basis, UNICEF contended that limitation should be calculated from August 1, 2019, rather than from the dates of the original IGST payments.
The appellant also relied upon the Supreme Court’s suo motu orders extending limitation during the COVID-19 pandemic, particularly the period extending the limitation framework through February 2022.
A significant factor in the Tribunal’s decision was an earlier Division Bench ruling in M/s. World Health Organization v. Commissioner of Customs (Airport & ACC), Kolkata.
UNICEF’s representative brought this decision to the Tribunal’s attention, pointing out that the Division Bench had already considered a similar question involving the limitation applicable to refund of IGST paid on imports by a United Nations agency.
In that case, the Tribunal had found that before August 1, 2019, it was unclear to an assessee as to which authority was required to process the refund claim. This position was clarified only through Circular No. 23/2019-Customs, which specified that Customs authorities would process refunds of IGST paid on imports.
The earlier decision therefore treated August 1, 2019 as the relevant starting point for computing limitation for such refund claims.
The Division Bench had also taken into account the Supreme Court’s COVID-related extension of limitation and concluded that the refund claims before it were filed within the permissible period.
In the present case, Member (Judicial) Binu Tamta observed that the issue was already covered by the decision of the Division Bench in the WHO matter.
The Tribunal expressly noted that the earlier decision was binding and therefore followed the same reasoning while deciding UNICEF’s appeals.
The Tribunal accepted UNICEF’s contention that there had been a procedural gap before August 1, 2019, since the applicable authority before whom the refund claim was required to be filed had not been clearly specified.
Consequently, the Tribunal held that the limitation period could not have commenced before the issuance of Circular No. 23/2019-Customs.
The Tribunal also considered the effect of the Supreme Court’s orders extending limitation during the COVID-19 pandemic.
Once the limitation period was taken to commence from August 1, 2019, the COVID-related extension became relevant to determine whether UNICEF’s May 2022 refund applications were within time.
Following the earlier Division Bench ruling, the Tribunal accepted that the Supreme Court’s extension of limitation had to be given effect while calculating the permissible period for filing the refund claims.
CESTAT ultimately concluded that UNICEF’s refund applications were filed within the permissible period.
Accordingly, the Tribunal rejected the department’s contention that the refund claims were barred merely because the underlying IGST payments had been made in 2017.
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