Limitation Period of 2 Years for GST Refund Not Applicable When Tax Is Paid Without Authority of Law: Andhra Pradesh High Court
Summary: The Andhra Pradesh High Court recently addressed the two-year limitation period for GST refund applications in the case involving M/s. Nspira Management Services Pvt. Ltd. & Others v. Assistant/Deputy Commissioner of Central Tax & Union of India. The petitioner, a registered taxpayer providing management and hostel accommodation services to students, had erroneously paid GST on residential dwelling services, as the landlords charged tax despite the services being exempt under Notification No. 12/2017-Central Tax (Rate). Upon filing for a refund, the GST department rejected the applications, citing that the two-year time limit prescribed under Section 54 of the CGST Act, 2017, had expired. The High Court, however, observed that any collection of tax must adhere to Article 265 of the Constitution, which requires the authority of law. Since the tax was paid despite the service being exempt, the payment was considered to be “without authority of Law.” Consequently, the Court held that the two-year limitation period is not applicable in such circumstances. The High Court set aside the department’s deficiency memos and directed the GST authorities to reconsider and pass appropriate orders on the refund application within four weeks, specifically instructing them to process the claim without regard to the period of limitation.
Background of the case
The petitioner is a company and registered Taxpayer under GST. The petitioner inter alia engaged in management of educational institutions, educational consultancy besides providing the same, also engaged in providing hostel accommodation services to students of various educational institutions. the petitioner had taken residential dwellings on rent from the respective landlords so as to provide accommodation to the students. Though the service is exempt under GST, landlords had been charged tax on the invoices issued by them, the petitioner has been paying tax. In view of the Exemption Notification, the petitioner filed refund application. Department issued the defect memo informing the petitioner to furnish certain details. Later, it was informed to the petitioner that the refund applications are not fit for processing as the time limit of two (02) years time period for submissions of refund application is already completed.
Court observation :- It is the specific case of the petitioner that, though it is not under obligation to pay tax on renting of residential dwelling services as per Entry No.12 of Exemption Notification No.12 by 2017-Central Tax (Rate), dated 28.06.2017, nevertheless it had paid the tax inasmuch as its landlords had been charging tax on the invoices issued.
Any collection of tax shall be in accordance with Article 265 of the Constitution of India which postulates that no tax can be collected without authority of law. Though the petitioner is not liable to pay tax, the same was paid as per the invoices raised by the landlords and therefore it had filed application seeking to refund of the same. The authorities have informed the petitioner that the applications are not fit for processing as the same were filed beyond the two (02) years as per Section 54 of CGST Act, 2017.
Conclusion by Court:-
The deficiency memos under challenge by the petitioner are set aside and the respondents (Department) are directed to consider the application of the petitioner for refund of tax without going into the question of limitation. the respondents (department)are directed to pass appropriate orders on the petitioner’s application within a period of four (04) weeks from the date of receipt of copy of the order.
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