Case Law Details
Delhi Metro Rail Corporation Ltd. Vs Additional Commissioner (Delhi High Court)
Limitation Period u/s 54(1) of the CGST Act cannot be invoked when tax is collected without authority of law
The Hon’ble Delhi High Court in the case of Delhi Metro Rail Corporation Limited vs. The Additional Commissioner, Central Goods and Services Tax Appeals and Others [W.P. (C) 6793/2023 dated September 18, 2023] held that the limitation period of two years under Section 54(1) of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) for filing an application for refund of tax, cannot be invoked when Revenue Department collected the tax without any authority of law. Hence the Writ Petition was allowed, and the Revenue Department was directed to process the claim for refund of the Petitioner.
Facts:
Delhi Metro Rail Corporation (“the Petitioner”) was engaged by Surat Municipal Corporation (“the Service Recipient”) to prepare a Project Report (“the Report”) on developing the Metro Rail Project in Surat, Gujarat. The Petitioner rendered the service for preparing the Report, and raised an invoice dated August 11, 2017, amounting to Rs.19,04,520/- including Goods and Service Tax (“GST”) of Rs. 2,90,520/-.
The Service Recipient paid Rs.16,14,000/- excluding GST to the Petitioner, and the Petitioner deposited GST amount of Rs.2,90,520/- for fulfilling compliance requirements under GSTR-3B. Thereafter, the Service Recipient, relying upon Notification No.12/2017 – Central Tax (Rate) dated June 28, 2017, informed the Petitioner that they are not required to charge GST upon the services provided.
The Petitioner filed a refund application (in form GST RFD-01) dated May 2, 2022 before the Revenue Department (“the Respondent”) for claiming the refund. However, the application was rejected vide Refund Rejection Order (“the Rejection order”) dated July 4, 2022 stating the reason that the refund application was filed after the expiry of two years from the relevant date. Therefore, the application is barred by limitation.
Aggrieved by the same, the Petitioner filed an appeal against the Rejection order before the Respondent to claim the refund. However, the Respondent, vide Order-in-Appeal No.241/2022-2023 dated February 24, 2023 (“the Impugned Order”) rejected the Petitioner’s appeal for the refund claim.
Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Delhi High Court.
Issue:
Whether the Limitation period can be invoked under Section 54(1) of the CGST Act when the tax is collected without any authority of law?
Held:
The Hon’ble Delhi High Court in W.P. (C) 6793/2023 held as under:
- Opined that, the Respondent cannot withhold the amount of tax deposited by the Petitioner under the erroneous belief that the Petitioner is required to deposit the tax collected with the Respondent, without any authority of law, would not be considered as tax collected, therefore the conditions laid out in Section 54 of the CGST Act would not be applicable in this case.
- Relying upon the judgement of Hon’ble Gujarat High Court in M/s Cosmol Energy Private Limited vs. State of Gujarat (R/Special Civil Application No. 11905/2020), wherein the Court directed the refund of the GST paid under a mistake, even though the application for a refund was submitted after the lapse of 2 years.
- Held that, the period of limitation for applying for a refund as prescribed under Section 54 of the CGST Act, would not apply in cases where GST is not chargeable and it is established that the payment was made in error due to a misinterpretation of law.
- Directed that, the respondent to process the Petitioner’s refund application even after lapses of 2 years’ time period by setting aside the Impugned and Rejection Order.
Conclusion:
The Delhi High Court’s judgment in the case of Delhi Metro Rail Corporation Ltd. vs. Additional Commissioner clarifies that the limitation period prescribed under the CGST Act cannot be invoked when tax is collected without legal authority. This decision is significant in protecting the rights of taxpayers and ensuring that tax authorities do not unjustly withhold refunds in cases of genuine error or misinterpretation of the law.
Relevant Provisions:
Section 54(1) of the CGST Act
“54. Refund of Tax
(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:”
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner (hereafter ‘DMRC’) has filed the present petition impugning an order (Order-in-Appeal No.241/2022-2023) dated 24.02.2023 passed by respondent no.1, whereby the DMRC’s appeal against an order dated 04.07.2022 passed by respondent no.2 was rejected.
2. The DMRC is, essentially, aggrieved by denial of its claim for the refund of ₹2,90,520/- as deposited by it under a mistake. There is no dispute that the refund as claimed would be payable to the DMRC. However, its refund claim was rejected on the ground that the application for refund was filed beyond the period of two years as stipulated under Section 54(1) of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’).
3. The DMRC was engaged by respondent no.3 (Surat Municipal Corporation) for preparation of a project report for the purpose of development of Metro Rail Project for the City of Surat, Gujarat. In terms of its engagement, the DMRC rendered services for the preparation of Detailed Project Report for the aforementioned project. And on 11.08.2017, raised an invoice of an amount of ₹19,04,520/- for the services rendered. The invoiced amount included Goods and Services Tax (GST) of ₹2,90,520/- computed at the rate of 18%.
4. Respondent no.3 paid an amount of ₹16,14,000/- against the said invoice but did not pay the amount of GST as included in the said invoice. In order to ensure that there is no failure in complying with its statutory provisions, the DMRC deposited a sum of ₹2,90,520/- with the GST Authorities for the month of August, 2017 (under Form GSTR-3B).
5. Thereafter, the DMRC was informed by respondent no.3 that in terms of Notification No.12/2017 – Central Tax (Rate) dated June 28, 2017 issued by the Ministry of Finance, Government of India, the services billed under the invoice dated 11.08.2017, were not chargeable to GST.
6. Thereafter on 02.05.2022, the DMRC filed an application for refund (in Form GST RFD-01) before respondent no.2 for the period of August, However, the said application was rejected by an order dated 04.07.2022 on the ground that the application for refund was filed after expiry of two years from the relevant date.
7. It is the DMRC’s case that retaining the amount paid under a mistake would amount to collection of tax without the authority of law and thus, violates Article 265 of the Constitution of India.
8. The DMRC relies upon the decision of the Supreme Court in State of Madhya Pradesh & Anr. v. Bhailal Bhai: AIR 1964 SC 1006, in support of its contention that payment made under a mistake of law is required to be refunded. It is also contended on behalf of the DMRC that in similar facts, in M/s Cosmol Energy Private Limited v. State of Gujarat: R/Special Civil Application No. 11905/2020, decided on 22.12.2020, the Gujarat High Court accepted the aforesaid view, and directed refund of the GST paid under a mistake notwithstanding that the application for refund was made after expiry of a period of two years.
9. A plain reading of the decision of the Gujarat High Court in M/s Cosmol Energy Private Limited v. State of Gujarat (supra) indicates that the issue decided in the said case is similar to the one involved in the present The court had held that “Section 54 of the CGST Act is applicable only for claiming refund of any tax paid under the provisions of the CGST Act and/or the CGST Act. The amount collected by the Revenue without authority of law is not considered as tax collected by them and, therefore, Section 54 is not applicable”
10. This Court had called upon the respondents to ascertain whether the Department had accepted the aforesaid view or had appealed the decision of the Gujarat High Court in M/s Cosmol Energy Private Limited v. State of Gujarat (supra).
11. Tripathi, learned counsel appearing for the respondents, fairly states that the Department has not filed any appeal against the decision of the Gujarat High Court in M/s Cosmol Energy Private Limited v. State of Gujarat (supra).
12. Article 265 of the Constitution of India proscribes any levy or collection of tax except by authority of law. Concededly, GST is not payable by the DMRC in respect of the service of preparation of Detailed Project Report for respondent no.3. Thus, the amount of ₹2,90,520/- deposited by the DMRC on an erroneous belief that payment for services rendered by it were chargeable to tax, cannot be retained by the respondents.
13. It is well settled that GST is an indirect tax. The burden of such tax is inevitably borne by the final recipient. In the present case, respondent no.3 would be liable to reimburse the GST chargeable on services availed by it. But since GST is not payable in respect of such services, respondent no.3 has not paid the said amount.
14. The period of limitation for applying for a refund as prescribed under Section 54 of the CGST Act, would not apply where GST is not chargeable and it is established an amount has been deposited under a mistake of law.
15. In view of the above, we set aside the impugned order dated 02.2023 as well as the refund rejection order dated 04.07.2022 and direct the respondents to process the DMRC’s claim for refund of ₹2,90,520/-.
16. The petition is allowed in the aforesaid terms.
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