Varidhi Cotspin Private Limited Vs Union of India & Ors. (Gujarat High Court)
Limitation Under Section 54 for GST Refund – Time Excluded for Deficiency Memo Processing
The Gujarat High Court, in Varidhi Cotspin Private Limited v. Union of India & Ors., held that the time taken for processing a GST refund application before a deficiency memo is issued must be excluded when calculating the two-year limitation period under Section 54 of the CGST Act. The Petitioner, Varidhi Cotspin, had filed its original IGST refund claim for deemed exports in November 2018, well within the limitation period. The claim was subsequently rejected on the ground of limitation in November 2023, following multiple rectifications after deficiency memos were issued by the department. The Respondent contended that each rectified application constituted a fresh claim subject to a new two-year limitation from the relevant date, citing Rule 90(3) of the CGST Rules. The High Court rejected the department’s contention, observing that rectified refund applications are a continuation of the original claim, not fresh proceedings, and that the original application itself halts the running of the limitation period. The court relied on a proviso inserted in Rule 90(3) via Notification No. 15/2021-CT, which explicitly mandates that the period between filing the initial application (Form RFD-01) and the communication of deficiencies (Form RFD-03) must be excluded from the two-year limitation. By applying this exclusion, the court determined that the Petitioner’s subsequent rectified claims were filed within the extended limitation period. This ruling aligns with previous judicial precedents, including the Gujarat High Court’s decision in M/s. La-Gajjar Machineries Private Limited and the Delhi High Court’s view in Bharat Sanchar Nigam Limited, which emphasize the substantive continuity of claims where genuine deficiencies are corrected. Consequently, the High Court quashed the rejection order and restored the Petitioner’s third rectified refund application for fresh adjudication on merits within twelve weeks.
