GST UPDATE ON NON-APPLIACBILITY OF LIMITATION FOR REFUND OF TAX PAID WITHOUT AUTHORITY OF LAW

The process of claiming refund from the department has always been a tedious task as the claim is often being rejected on the technical grounds. Recently, M/s COSMOL ENERGY PVT. LTD. had filed writ petition before the Hon’ble Gujarat High Court against rejection of their refund claim on the grounds of limitation when the Hon’ble Gujarat High Court in their own case along with M/s MOHIT MINERALS PRIVATE LIMITED had declared levy of IGST on ocean freight vide Notification dated 28 June 2017 as ultra vires the levy contemplated under the CGST /IGST Actand Article 14 of the Constitution.M/s COSMOL ENERGY PVT. LTD., had filed consequential refund claim for refund of IGST paid on ocean freight which was rejected on the grounds that the claim has been filed beyond the stipulated period prescribed in section 54 of the CGST Act, 2017. Hence, present petition was filed before the Hon’ble Gujarat High Court for granting appropriate relief. The reasoning adopted by the hon’ble High Court is the subject matter of consideration of the present update.

Before proceeding further, it is submitted that an illegal levy would be a case where the tax is collected by the authorities under the Act by mis-construction or wrong interpretation of the provisions of the Act, Rules and Notifications or by an erroneous determination of the relevant facts. Where the Court holds that levy of tax is unconstitutional, any person who has paid tax can claim a refund under Article 265 of the Constitution which states that “no tax shall be levied or collected except by the authority of law”. Now, the moot question that arises is that whether the period of limitation for filing refund claims are applicable in such cases or not.
The hon’ble Gujarat High Court relied on the decision given in the case of M/s BINANI CEMENT LTD. VERSUS UNION OF INDIA reported in [2013 (288) E.L.T. 193 (GUJ)] wherein it was 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 is held that the assessee is not bound by the limitation prescribed under the special law for claiming the refund of the excess duty or duty collected illegally. Similarly, reliance was placed on the decision given in the case of JOSHI TECHNOLOGY INTERNATIONAL VERSUS UNION OF INDIA reported in [2016 (339) E.L.T. 21 (GUJ.)] wherein this 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.
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.

Apart from the above decisions, reliance was placed on decision given in the case of GOKUL AGRO RESOURCES LTD. VERSUS UNION OF INDIA and BHARAT OMAN REFINERIES LTD. VERSUS UNION OF INDIA. Therefore, in view of the above referred decisions, department was directed to process the refund claim filed in the prescribed form RFD-01 online portal for the month of February, 2018 along with simple interest at the rate of 6% per annum.

Therefore, department cannot withheld refund claim with respect to amount paid mistakenly in guise of tax by the assessee on the technical grounds such as limitation.
This is a landmark decision taken by Gujarat High Court and clearly held that the limitation period is not applicable when the levy itself is held constitutional. But the challenge to GST liability on ocean freight is itself pending in Apex Court, hence it is very likely that the impugned decision is also challenged in High Court. Hence, let us wait and watch…..
This is solely for educational purpose.
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GST UPDATE ON NON-APPLIACBILITY OF LIMITATION FOR REFUND OF TAX PAID WITHOUT AUTHORITY OF LAW

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