GST Authorities Can't Deny Refund Of Pre-Deposit On Grounds Of Limitation, Violates Article 265: Jharkhand High Court

The Jharkhand High Court has held in a recent judgement that rejecting a refund claim for a statutory pre-deposit which has been made under Section 107(6)(b) of the GST Act, on the ground that the claim was filed after the 2-year limitation under Section 54(1), is legally unsustainable.

The Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan stated, “There is no dispute to the effect that once refund is by way of statutory exercise, the same cannot be retained neither by the State, nor by the Centre, that too by taking aid of a provision which on the face of it is directory, inasmuch as, the language couched in Section 54 is 'may make an application before the expiry of 2 years from the relevant date.'”

“In terms of the interpretation extended by the Hon'ble Apex Court, as also, taking into consideration that the refund of statutory pre-deposit is a right vested on an assessee after an appeal is allowed in its favour, we have no reason to say that the pre-deposit made by an assessee cannot be forfeited taking aid of section 54 of the Act and the same cannot be the intent of the Act of 2017,” the Court further stressed.

As per the factual matrix of the case the petitioner is a registered dealer under the Goods & Services Tax Act and carries out business of loading, unloading of Coal and transportation of coal loaded into tipper. In the month of January 2021, alleging mismatch in GSTR-1 and GSTR-3B for the month of September 2019, Show Cause Notice under Section 74 of the JGST Act, 2017 was issued and ex- parte order was passed vide order dated 31.08.2021, imposing liability of Rs. 16,90,442/-, which inter alia included tax, interest and penalty.

Aggrieved thereof, the petitioner preferred an appeal within time making a statutory pre-deposit of the 10% of the disputed tax amount under Section 107(6)(b) of the Act, in order to maintain the appeal, which was subsequently allowed.

Thereafter, the petitioner made an application for refund of the pre-deposit amount, which by virtue of a Deficiency Memo was held to be beyond the period prescribed under section 54(1) of the Goods & Services Tax Act and hence, aggrieved thereof, the petitioner came before the High Court.

The respondents filed a counter affidavit defending the actions of the Department purportedly in terms of Section 54 and also referring to Circular issued by the Government of India, Ministry of Finance, GST Policy Wing, treating the application to be time barred and further submitting that the Jurisdictional Officer has no authority/discretion to condone the delay.

Rejecting the same, the Court stated, “It is not even a case that there is any unjust enrichment on the part of the assessee, inasmuch as, the pre-deposit has been made from the own pocket by an assessee and by restricting the refund in reading the word 'may' as 'shall' would be unreasonable and would otherwise be arbitrary and in conflict with the Limitation Act, 1963.”

The Court concluded, “It is held that the action of the respondents in rejecting the refund application considering it as time barred has no legs to stand in law and accordingly, the rejection order by way of Deficiency Memo dated 06.11.2024, is hereby, quashed and set-aside.”

Consequently, the Court allowed the writ petition, and directed the Department to process the refund with applicable statutory interest within six weeks.

Case Title: M/s. BLA Infrastructure Private Limited Versus State of Jharkhand

LL Citation: 2025 LiveLaw (Jha) 33

Click Here To Read Judgement