Sai Steel Vs State of Bihar through (Patna High Court)
The Patna High Court has set aside the rejection of a refund claim made by the taxpayer under Section 77 of the CGST Act, 2017 and Rule 89(1A) of the CGST Rules. The petitioner had initially paid CGST and SGST on certain supplies mistakenly treated as intra-State transactions. However, a subsequent departmental audit determined the transactions to be inter-State, prompting the petitioner to pay the correct IGST on 04.03.2023 and apply for a refund of the earlier taxes.
The refund application was rejected by the Department on the ground that it was filed beyond the two-year limitation period prescribed under Section 54 of the CGST Act, reckoning limitation from the date of original (incorrect) payment made in January 2018.
The High Court ruled that this approach was legally flawed. Citing CBIC Circular No. 162/18/2021-GST and aligning with the judgment of the Jharkhand High Court in Gajraj Vahan (P.) Ltd., the Court held that the limitation for such refund claims must be computed from the date of payment of tax under the correct head, i.e., the IGST payment made in March 2023—not from the date of initial mistaken payment.
The Court emphasized that the rejection order, if upheld, would nullify the effect of Section 77 of the CGST Act and related IGST provisions. Accordingly, it allowed the writ petition, directed refund of the CGST and SGST amounts along with interest, and awarded ₹10,000 as litigation cost.
