Delhi High Court Remands GST Refund Case Citing Post-Rejection Limitation Extension

New Delhi: In a significant ruling concerning the computation of limitation period for Goods and Services Tax (GST) refund applications amidst the COVID-19 pandemic, the Delhi High Court has set aside an order rejecting an Input Tax Credit (ITC) refund claim and remanded the matter for fresh consideration.

A division bench of Justices Sanjeev Sachdeva and Ravinder Dudeja , in their order dated February 8, 2024, directed the tax authorities to reconsider the refund application filed by M/s Bharti Enterprises in light of a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) which extended the limitation period.

Background of the Case

The petitioner, M/s Bharti Enterprises, had filed an application on April 12, 2022, seeking a refund of accumulated ITC amounting to Rs. 17,70,982/- for the tax periods July 2020 to December 2020.

The tax authority issued a Show Cause Notice on May 23, 2022, proposing to reject the application on the grounds of it being filed belatedly. Subsequently, on July 27, 2022, the application was rejected, primarily because the petitioner failed to respond to the Show Cause Notice.

Crucial Post-Rejection Development

Critically, after the rejection order was passed, the CBIC issued a Notification dated July 5, 2022. This notification, aligned with the Supreme Court's orders in Suo Motu Writ Petition (Civil) No. 3 of 2020 concerning the extension of limitation due to the pandemic, directed that the period from March 1, 2020, to February 28, 2022, be excluded for computing the period of limitation under various provisions, including applications filed under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act), which governs refunds.

By virtue of this circular, the petitioner's refund application, filed on April 12, 2022, for periods ending in December 2020, would fall within the extended period of limitation.

Court's Reasoning and Decision

The petitioner's appeal against the rejection order was also dismissed on the ground of limitation. The court noted that the petitioner had previously approached the High Court regarding four other similar appeals, where, by an order dated August 9, 2023 (W.P. (C) 10235/2023), orders of remit were passed, sending those cases back for reconsideration.

Considering the "peculiar circumstances" of the case, specifically that the benefit of the exclusion of the COVID-19 period became available subsequent to the initial order rejecting the refund application, the High Court deemed it appropriate to intervene.

The bench observed that the tax authority's rejection was based on the unextended limitation period, and the subsequent CBIC circular fundamentally altered the legal basis for assessing the timeliness of the application.

Consequently, the High Court allowed the petition, effectively setting aside the rejection order dated July 27, 2022 (implicitly, by remanding the matter). The court directed Respondent No. 3 to reconsider the petitioner's application afresh, specifically in light of the CBIC circular dated July 5, 2022.

The tax authority has been mandated to process the refund application as expeditiously as possible, and in any event, within a period of eight weeks from the date of the order. The petition was disposed of in these terms.

This judgment reinforces the principle that significant changes in law or procedure, especially those stemming from higher judicial directives or government notifications extending statutory timelines due to extraordinary circumstances like a pandemic, must be considered even if they arise after an initial administrative decision has been made. It ensures that litigants are not prejudiced by delays attributable to the period covered by such limitation extensions.