Delhi Metro Rail Corporation Ltd. Vs Commissioner (Appeals-II) & Anr. (Delhi High Court)
Relevant date for the purpose of GST refund arising due to result of conciliation shall be date of conciliation agreement- Delhi High Court; DMRC Tax Refund Dispute: Court Rules on Limitation Period; Delhi Metro’s GST Refund Challenge Succeeds in High Court
Delhi High Court, in a hybrid mode hearing, has set aside orders rejecting the Delhi Metro Rail Corporation (DMRC)’s applications for a Goods and Services Tax (GST) refund amounting to ₹83,36,182. The court’s decision hinged on the interpretation of the “relevant date” for calculating the limitation period for refund claims under Section 54 of the Central Goods and Services Tax (CGST) Act, 2017.
The dispute originated from a rental agreement dated May 8, 2015, between DMRC and M/s Kamal Sponge Steel and Power Limited (KSSPL). Following disagreements, the matter was referred to conciliation, culminating in minutes dated October 9, 2020, and a formal Conciliation Agreement signed on August 3, 2021. This settlement reduced KSSPL’s payment liability by 40%, revealing that DMRC had made an excess tax payment calculated on the pre-dispute lease provisions.
DMRC subsequently filed refund applications in 2021, which the GST Department rejected on grounds of limitation. The Department contended that the two-year limitation period for filing the refund application commenced in 2017 when the tax payments were initially made.
DMRC, however, argued that the exact amount of tax payable could only be ascertained after the conciliation process resolved the underlying dispute. They contended that their case fell under Explanation 2(d) of Section 54 of the CGST Act, which defines “relevant date” as “the date of communication of such judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court” when tax becomes refundable as a consequence of such a decision.
Conversely, the Department asserted that Explanation 2(h), the residual clause defining “relevant date” as “the date of payment of tax” in any other case, should apply. The Department’s counter-affidavit also highlighted that DMRC had opportunities to issue credit notes under Section 34 of the CGST Act to adjust the excess paid tax but failed to do so, and also did not file the refund claim within the prescribed time limit.
The High Court considered whether the “relevant date” for the refund application should be interpreted under Explanation 2(d) or 2(h) of Section 54. The court noted that Explanation 2(h) is a residual clause, while Explanation 2(d) specifically addresses situations where tax becomes refundable due to a judgment, decree, order, or direction of an appellate authority or court.
The court acknowledged the practical difficulty in ascertaining the exact tax payable when contract values are disputed. It observed that provisional tax payments are often made in such scenarios, and the true extent of excess payment only becomes clear after the dispute is resolved.
The rental agreement between DMRC and KSSPL included an amicable resolution clause (Article 12A), providing for conciliation. The court noted that the conciliation proceedings led to broadly agreed terms by July 2020, including a 40% reduction in lease amount, which were approved by the DMRC Managing Director on September 8, 2020. The Conciliation Agreement was formally entered into on October 9, 2020, further solidifying the settlement. This agreement conclusively determined the contractual value, thereby enabling the ascertainment of the excess tax paid. The final conciliation agreement was executed on August 3, 2021, under Section 73 of the Arbitration and Conciliation Act, 1996, effectively converting it into a settlement agreement.
The court highlighted that under Section 73 of the Arbitration and Conciliation Act, a signed settlement agreement is final and binding. Furthermore, Section 74 of the same Act stipulates that such a settlement agreement “shall have the same status and effect as if it is an arbitral award on agreed terms.” Given that an arbitral award is equivalent to a decree of a Civil Court as per Section 36 of the Arbitration and Conciliation Act, the court concluded that the conciliation agreement in this case was analogous to a judgment or decree.
Therefore, the court held that the date of finalisation of the settlement agreement (either October 9, 2020, or August 3, 2021) should be considered the “deemed date of communication of the judgment/decree” under Section 54, Explanation 2(d) of the CGST Act. The court reasoned that Explanation 2(d) was the appropriate provision to apply, as Explanation 2(h) is a residual provision to be used only when no other explanation fits.
Considering this interpretation, the refund applications filed by DMRC on January 17, 2021, and March 21, 2021, were deemed well within the two-year limitation period from either October 9, 2020, or August 3, 2021.
Consequently, the High Court set aside the impugned orders that rejected DMRC’s refund applications. The court directed the GST Department to process DMRC’s refund along with applicable interest within one month. The petition was disposed of accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
