Atanu Mondal Vs Jhawar Suppliers (GSTAT Kolkata)
Summary : The Goods and Services Tax Appellate Tribunal (GSTAT), Kolkata Bench, dismissed the Revenue’s appeal against an order allowing refund of ₹1,10,510 deposited by Jhawar Suppliers through Form GST DRC-03 towards a mandatory service tax appeal pre-deposit. The dispute arose from a service tax demand of ₹14,73,456 for FY 2015-16. Under Section 35F of the Central Excise Act, 1944, applicable to service tax appeals through Section 83 of the Finance Act, 1994, the taxpayer was required to deposit 7.5% of the disputed duty. Owing to difficulties accessing the ACES portal, the taxpayer paid ₹1,10,510 on 27 May 2022 through Form DRC-03 using its GST Electronic Cash Ledger, expressly identifying the payment as a service tax appeal pre-deposit. Subsequently, after learning that DRC-03 was not an accepted payment mechanism for the legacy appeal, the taxpayer deposited the same amount through the CBIC ICEGATE portal on 9 April 2024. Following the appellate order dated 25 July 2024 setting aside the service tax demand, the taxpayer sought refunds of both deposits. While the ICEGATE deposit was refunded, the DRC-03 payment was rejected because the refund application dated 3 October 2024 had been filed beyond two years from the original payment date.
The First Appellate Authority allowed the disputed refund, holding that the amount was neither GST nor a payment towards any liability arising under the CGST Act, 2017. The Revenue challenged that decision, arguing that the words “any other amount” in Section 54(1) brought the claim within the statutory two-year limitation period. The Tribunal rejected this contention, relying on judicial precedents concerning amounts collected without authority of law and payments made under mistake of law. It held that Section 54 applies to refunds of taxes paid under GST legislation and does not govern recovery of a legacy service tax appeal pre-deposit mistakenly routed through Form DRC-03. The Tribunal considered the general provisions of the Limitation Act applicable instead. Relying particularly on Comsol Energy Pvt. Ltd. v. State of Gujarat, Binani Cement Ltd. v. Union of India, Joshi Technology International v. Union of India and 3E Infotech Ltd. v. CESTAT, it concluded that the Revenue could not defeat the refund merely by invoking the GST limitation provision. Applying Suvidhe Ltd. v. Union of India and CBEC Circular No. 984/08/2014-CX, the Tribunal further held that a statutory appeal pre-deposit is not payment of duty and that the doctrine of unjust enrichment does not apply to its refund. Accordingly, the Tribunal upheld the First Appellate Authority’s order granting refund of ₹1,10,510 and dismissed the Revenue’s appeal.
Cases Discussed
1. Comsol Energy Private Limited Vs State of Gujarat (Gujarat High Court); R/Special Civil Application No. 11905 of 2020; 21/12/2020; AY: Not Applicable. The Tribunal relied on this decision for the principle that amounts collected without authority of law fall outside Section 54 of the CGST Act and that Section 17 of the Limitation Act governs recovery of amounts paid under mistake of law.
2. Mohit Minerals (Pvt.) Ltd. Vs Union of India and Others (Gujarat High Court); Special Civil Application No. 726 of 2018 Discussed through the factual background of Comsol Energy, concerning the constitutional validity of IGST on ocean freight under reverse charge.
3. Binani Cement Ltd. Vs Union of India (Gujarat High Court); 2013 (288) ELT 193 (Guj.). Relied upon for the proposition that the special statutory limitation for refunds does not govern recovery of duty collected without authority of law.
4. Joshi Technology International Vs Union of India (Gujarat High Court); 2016 (339) ELT 21 (Guj.). Relied upon concerning refunds of duty paid under mistake of law and the inapplicability of Section 11B of the Central Excise Act.
5. 3E Infotech Ltd. Vs CESTAT (Madras High Court); 2018 (18) GSTL 410 (Mad.). Relied upon for allowing refund of service tax paid under mistake of law notwithstanding expiry of the statutory refund period.
6. Suvidhe Ltd. Vs Union of India (Bombay High Court); 1996 (82) ELT 177 (Bom.). Followed for the distinction between payment of duty and statutory appeal pre-deposit and the inapplicability of unjust enrichment to refund of such deposits.
FULL TEXT OF THE ORDER OF GSTAT KOLKATA
1. This appeal has been filed u/s 112(3) by the Revenue assailing the Appellate Order (No. 419/CGST/Kol-North/2025 dated 19.08.2025) passed by Joint Commissioner, CGST & CX, Kolkata Appeal- I Commissionerate in respect of M/s. Jhawar Suppliers (GSTIN 19AAHFJ0709N1Z2).
2. The facts of the case in brief.
(I) M/s. Jhawar Suppliers had filed an appeal before the Commissioner of Central Tax, Kolkata Appeal -I Commissionerate against an O-I-O demanding service tax of Rs.14,73,456/- along with interest and penalty for the F.Y. 2015-16.
ii. Section 35F of the Central Excise Act, 1944 requires that the Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal unless the appellant has deposited 7.5% of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute.
iii. However, due to login issues in ACES portal, the appellant could not deposit the mandatory appeal pre deposit of Rs. 1,10,510 through ACES portal. So, he paid it by Form DRC 03(Intimation of payment made voluntarily or made against the show cause notice) on 27.05.2022 under CGST Act, utilizing the balance available in his Electronic Cash Ledger in GST portal. It was mentioned by the taxpayer in DRC 03 that the payment was “Service Tax Appeal Fees for Period 2015-2016. OIO No.: 26/ST/AC-BKP/Jharwar Supplier/2021-22 dated 07.03.2022. REF: C. No.: V(3)15/CGST & CX/Adjn./BKP/Jharwar Supplier/2020-21/64”.
iv. When the appellant come to know that payment through Form DRC 03 is not a valid mode of payment for Service Tax appeal pre deposit, he paid the pre deposit of Rs.1,10,510/- on 09.04.2024 through CBIC ICEGATE portal.
v. In the Appellate Order dated 25.07.2024, the impugned demand for Service Tax was set aside. On receipt of the Appellate Order, the appellant filed following two refund applications:
i. One towards refund of Service Tax appeal pre-deposit of Rs.1,10,510/- paid on 09.04.2024 through Service Tax Challan which was sanctioned by the Revenue on 05.09.2024.
ii. The other refund application was filed in GST RFD-01 in respect of service tax appeal pre deposit of Rs.1,10,510/- which was paid through DRC 03 on 27.05.2022.
(VI) The later application was rejected on the ground of limitation. The Assistant Commissioner CGST & CX, Barrackpore Division took the view that the refund claim was to be decided as per section 54(1) of CGST Act,2026 which reads as under :
“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”.
As per Explanation to clause 2(h) of Section 54 of CGST Act, 2017, the “relevant date” for such refund claim is the date of payment of tax.. In the instant case, the date of payment is 27.05.2022 and the refund application was filed in “Any Other Category” on 03.10.2024 i.e., after more than two years from the relevant date (date of payment)”.
[3] THE REASONING IN THE IMPUGNED ORDER-IN-APPEAL (O-I-A)
The First Appellate Authority allowed the claim of refund. His reasoning was as follows: –
i) The payment of ₹1,10,510/- was not made towards any tax, interest, or liability under the CGST Act, 2017, but was a pre-deposit to comply with the provisions of Section 35F of the Central Excise Act, 1944, which was applicable to Service Tax vide Section 83 of the Finance Act, 1994. This position is reaffirmed by CBEC Circular No. 984/08/2014-CX dated 16.09.2014, which clarifies that pre-deposits made under Section 35F are mandatory for filing an appeal and refundable upon favourable disposal.
ii. Section 54 of the CGST Act, 2017 governs refund of taxes and interest paid under GST laws. However, pre-deposit made for appeals under legacy laws is not a ‘tax’ under CGST, as held by the Hon’ble Gujarat High Court in Comsol Energy Pvt. Ltd. v. State of Gujarat [2021 (47) G.S.T.L. 11 (Guj.)]. Similarly, the Hon’ble Jharkhand High Court in BLA Infrastructure Pvt. Ltd. v. State of Jharkhand [W.P.(T) No. 6527 of 2024] has ruled that limitation under Section 54 cannot be invoked to deny refund of statutory pre-deposit once the appeal has been allowed in favour of the assessee.
iii. As per Article 265 of the Constitution of India, “No tax shall be levied or collected except by authority of law.” The amount in question was neither a tax nor collected under any statutory authority under GST, and hence, cannot be retained by the department without authority.
iv. Although the payment was routed through Form DRC-03 (a form prescribed under Rule 142(2) of the CGST Rules, 2017), the purpose was clearly indicated as “Service Tax Appeal Pre-deposit for FY 2015-16”. There is no express bar under the CGST Rules, 2017, prohibiting the use of DRC-03 for making payments unrelated to GST, especially when administrative exigencies warranted it (due to ACES portal inaccessibility).
V) The CBIC Circular No. 125/44/2019-GST dated 18.11.2019 (para 3.2) clarifies that refund of excess balance in cash ledger is not governed by the two-year time limit under Section 54. The amount paid through DRC-03 being debited from the Electronic Cash Ledger, can be construed as excess balance, especially when not applied against GST liabilities.
vi) The doctrine of unjust enrichment, under Section 54(8), is not attracted here as the appellant paid the pre-deposit from its own funds, and the burden was not passed on to any customer.
vii) Intent of the Law: The procedural difficulty (login issue) forced the appellant to adopt an alternate route for making payment. Denial of refund due to procedural formality would be against the spirit of natural justice and would result in unjust enrichment of the Revenue.
[4] GROUNDS OF APPEAL BY THE REVENUE.
According to the Revenue, the Order-in-Appeal is erroneous, legally unsustainable, and contrary to the provisions of the CGST Act, 2017, and therefore liable to be set aside.
i. The appellant filed the refund application of the said amount under ‘any other’ category. Although the amount paid by the appellant is not tax and interest, it is covered by the clause “any other amount” and therefore, the refund of such amount is to be governed by the provision of Section 54(1) of the CGST Act. Further, as per provisions of Section 54(1) of CGST Act,2017, “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”. The relevant date for such refund claim, as per Explanation clause 2(h) of Section 54 of CGST Act, 2017 is the date of payment. In the instant case, the date of payment is 27.05.2022 and the refund application is filed in “Any Other Category” on 03.10.2024 i.e., after more than two years from the date of payment.
ii. Hence the application for refund was barred by limitation and it was erroneous to allow the claim.
[5] ANALYSIS AND DECISION
We have heard the Revenue and Mr. Rip Das, CA appearing for the taxpayer and also perused the records.
I). The Hon’ble Gujarat High Court dealt with a similar situation in COMSOL ENERGY PRIVATE LIMITED Versus STATE OF GUJARAT (R/SPECIAL CIVIL APPLICATION NO. 11905 of 2020).
The writ-applicant filed the refund claims of the Integrated Goods and Services Tax paid on the Ocean Freight under the reverse charge mechanism after the decision of the Gujarat High Court in the writ-applicant’s own case which was connected with the main petition of Mohit Minerals (Pvt) Ltd. vs. Union of India and others (Special Civil Application No.726 of 2018). The Hon’ble High Court, vide Order and Judgment dated 23.01.2019, held that the Notification No.8/2017 – Integrated Tax (Rate) dated 28.06.2017 and the Entry No.10 of the Notification No.10/2017 under the Integrated Tax (Rate) dated 28.06.2017 lack legislative competency and the same were accordingly declared as unconstitutional.
When the writ petitioner filed refund claims, the Revenue issued Deficiency Memo on the premise that the refund claims were not filed within the statutory time limit provided under Section 54 of the CGST Act as Section 54 does not provide separate category for claiming refund of such amount.
The High Court observed:
“7. 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 GGST Act. The amount collected by the Revenue without the authority of law is not considered as tax collected by them and, therefore, Section 54 is not applicable. In such circumstances, Section 17 of the Limitation Act is the appropriate provision for claiming the refund of the amount paid to the Revenue under mistake of law, which is as under:
“Section 17(1) of the Limitation Act, 1963
(1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act, —
a. the suit or application is based upon the fraud of the defendant or respondent or his agent; or
b. *****
c. the suit or application is for relief from the consequences of a mistake; or
d. ***”
The Hon’ble Court quashed the deficiency memos and ordered refund alongwith interest.
II. The Hon’ble Gujarat High Court, in the case of Binani Cement Ltd. vs.
Union of India, reported in 2013 (288) ELT 193 (Guj), held that where the duty is collected without any authority of law, such collection of duty is considered as collected without authority of law and, therefore, is opposed to Article 265 of the Constitution of India and, thus, unconstitutional. It was held that the assessee was not bound by the limitation prescribed under the special law for claiming the refund of the excess duty or duty collected illegally. The period of limitation prescribed under the Limitation Act would apply.
III. In the case of Joshi Technology International vs. Union of India, reported in 2016 (339) ELT 21 (Guj), the Gujarat High Court held that the statutory time limit provided under Section 11B of the Central Excise Act is not applicable to the claim of refund of duty paid under mistake as the same was paid under mistake of law and, therefore, such claim is considered as outside purview of enactment. It was held that general provisions provided under the Limitation Act is applicable to claim refund of such duty.
IV. Similarly, in the case of 3E Infotech Ltd. vs. CESTAT, reported in 2018(18) GSTL 410 (Mad.), the Madras High Court held that the service tax paid under mistake of law is to be returned to the assessee irrespective of the period covered under the refund application. It was held that refusing to return the amount would go against the mandate of Article 265 of the Constitution of India. The Hon’ble Court observed: –
“13. On an analysis of the precedents cited above, we are of the opinion, that when service tax is paid by mistake a claim for refund cannot be barred by limitation, merely because the period of limitation under Section 11B had expired. Such a position would be contrary to the law laid down by the Hon’ble Apex Court, and therefore we have no hesitation in holding that the claim of the Assessee for a sum of Rs.4,39,683/- cannot be barred by limitation, and ought to be refunded.”
V. In our considered view, the issue in the present appeal is squarely covered by the above precedents.
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 IGST Act. The amount of Rs.1,10,510/- paid by the taxpayer through Form DRC 03 on 27.05.2022 under major head CGST was a pre deposit payable for preferring appeal against an order of demand of service tax. Therefore, the statutory time limit provided under section 54 of CGST Act,2017 is not applicable to the claim of refund of the pre deposit as the same was paid under mistake of law and, therefore, such claim is outside purview of CGST Act. The general provisions provided under the Limitation Act is applicable to claim refund of such amount.
VI. Following the ratio of the Hon’ble Bombay High Court in the case of Suvidhe Ltd. Vs. Union of India reported in 1996 (82) ELT 177 (Bom.), we hold that the principle of unjust enrichment is not applicable to refund of pre-deposit made for preferring appeal.
The Hon’ble Bombay High Court declared in the case of Suvidhe Ltd. Vs. Union of India reported in 1996 (82) ELT 177 (Bom.)
“In respect of a deposit made under Section 35F, provisions of Section 11B can never be applicable. A deposit under Section 35F is not a payment of Duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief…In respect of such a deposit the doctrine of unjust enrichment will be inapplicable.”
SLP filed against the above judgement by the Union of India was rejected by the Hon’ble Supreme Court. Subsequently, The Central Board of Excise & Customs issued Circular no. 984/08/2014-CX dated September 16, 2014 which reiterated:
“5.2 Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need not be subjected to the process of refund of duty under Section 11B of the Central Excise Act, 1944 or Section 27 of the Customs Act, 1962. ….”
VII) We therefore, uphold the impugned order-in -appeal of the First Appellate Authority allowing refund of Rs. Rs.1,10,510/- paid by the taxpayer through Form DRC 03 and reject the appeal of the Revenue.
