M/S Merek Life Science Private Limited vs The Union Of India on 7 November, 2025
AI Legal Insights
This GST case law analysis examines M/S Merek Life Science Private Limited vs. The Union Of India, concerning refunds under the CGST Act. The core issue revolves around the limitation period under Section 54 for claiming refunds of Integrated Goods and Services Tax (IGST) wrongly paid. The petitioner initially believed services constituted inter-State supply but subsequently realized and correctly paid Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). The Karnataka High Court addressed whether the two-year limitation period barred the refund, ultimately ruling in favor of the petitioner and remanding the case for a decision on merits.
This case clarifies the interpretation of limitation periods for IGST refund claims when taxpayers self-realize and rectify inter-state supply errors by paying CGST/SGST. It favors taxpayers by emphasizing the principles of restitution and preventing unjust enrichment by the revenue department.
- Refunds for wrongly paid IGST are permissible even after self-realization of intra-state supply.
- Limitation under Section 54 is calculated from the date of correct tax payment, not initial erroneous payment.
- Revenue cannot retain IGST if CGST/SGST has been correctly paid for the same intra-state supply.
- CBIC Circular 162/18/2021-GST provides guidance on relevant dates for calculating limitation in such scenarios.
- Rejection of refund claims solely on limitation, without addressing merits, is unsustainable.
QWhat is the time limit to claim GST refund?
As per Section 54 of the CGST Act, 2017, the time limit to claim a GST refund is generally two years from the relevant date. The relevant date varies depending on the nature of the refund claim, such as the date of export or the date of payment of tax.
QCan I get a refund of IGST if I paid CGST/SGST by mistake?
Yes, if you mistakenly paid IGST but should have paid CGST/SGST for an intra-state supply, you are eligible for a refund of the wrongly paid IGST. This is subject to the condition that you have already paid the correct CGST/SGST and that the refund claim is filed within the prescribed limitation period, as clarified in CBIC Circular No. 162/18/2021-GST.
Ruling Summary
udgment Summary: M/S Merek Life Science Private Limited vs The Union Of India**
1. Outcome
The High Court of Karnataka allowed the writ petitions. It set aside the impugned refund rejection orders passed by Respondent No. 3 and held that the petitioner's refund applications were not barred by limitation. The matters were remitted back to Respondent No. 3 to pass appropriate orders on the refund applications on their merits, within three months, considering the observations made in the judgment.
2. Core Issue
The core issue was whether the refund applications for Integrated Goods and Services Tax (IGST) wrongly paid by the petitioner, under a bonafide belief that services constituted inter-State supply/export of services, but which were subsequently realized and correctly paid as intra-State supply (Central Goods and Services Tax - CGST and State Goods and Services Tax - SGST), were barred by the two-year period of limitation prescribed under Section 54 of the CGST Act, 2017 and Rule 89(1A) of the CGST Rules, 2017.
3. Key Facts
* M/S Merek Life Science Private Limited, a Science and Technology company, provided intermediary services to foreign entities during the periods of November 2017, July 2017, October 2017, August 2017, and September 2017.
* Initially, the petitioner paid IGST under the bonafide belief that these services qualified as "export of services" (inter-State supply) as per the IGST Act, 2017.
* Subsequently, the petitioner realized that these services were not "export of services" but rather "intra-State supply."
* In March 2018, the petitioner discharged and paid the correct State GST (CGST and SGST) under the provisions of the Karnataka Goods and Services Tax Act, 2017, for the same periods.
* On 30.03.2024, the petitioner filed refund applications before the Central Tax Authorities (Respondent Nos. 2 and 3) for the IGST erroneously paid.
* Respondent No. 3 issued refund rejection notices dated 08.05.2024, which, after the petitioner's reply, culminated in impugned orders dated 25.05.2024 and 27.05.2024, rejecting the refund claims solely on the ground of being barred by limitation under Section 54 of the CGST Act.
4. Arguments (Taxpayer vs Revenue)
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Taxpayer (M/S Merek Life Science Private Limited):
- The power to grant refund for wrongfully paid tax emanates from Section 19(1) of the IGST Act and Section 77(1) of the CGST Act, read with Rule 89(1A) of the CGST Rules, not solely from Section 54 of the CGST Act.
- Section 54 of the CGST Act is inapplicable in cases where the Central Authorities have retained an amount paid by the petitioner, especially when the exact same amount has been paid to the State GST Authorities.
- The Central Authorities are not entitled to retain the erroneously collected IGST under the doctrine of unjust enrichment, particularly after the petitioner has correctly paid the State GST.
- Section 54 of the CGST Act (prescribing a two-year limitation) is directory in nature, not mandatory, as held by various High Courts.
- CBIC Circular No. 162/18/2021-GST dated 25.09.2021 clarifies that the term "subsequently held" includes self-realization by the taxpayer and provides for an extended limitation period (two years from the date of payment under the correct head, or from 24.09.2021 if the correct tax was paid earlier).
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Revenue (Union of India / Assistant Commissioner of Central Taxes):
- The refund applications filed on 30.03.2024 were beyond the two-year period of limitation stipulated in Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules.
- These statutory provisions (Section 54 and Rule 89(1A)) are mandatory, and thus, refund applications filed beyond the prescribed period are not maintainable.
- The Department followed due process, issued a show cause notice, granted a personal hearing, and passed a speaking order rejecting the refund claim based on limitation.
- While admitting that the IGST was paid in excess and subsequently correct CGST/SGST was paid, the Revenue maintained that the refund was time-barred.
5. Court’s Reasoning
* The Court referred to Section 77(1) of the CGST Act and Section 19(1) of the IGST Act, which clearly provide for a refund of tax "wrongfully collected and paid."
* It acknowledged Rule 89(1A) of the CGST Rules, which prescribes a two-year period for filing such refund claims.
* Crucially, the Court relied on precedents from the High Court of Madras in Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST (Appeals-1) and the High Court of Andhra Pradesh in Louis Dreyfus Company Pvt. Ltd. v. Union of India and Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax. These judgments held that Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules are directory and not mandatory, particularly when tax is paid under a mistake of law or without the authority of law.
* The Court highlighted Article 265 of the Constitution of India, stating that no tax can be collected without the authority of law. Since the Central GST authorities were not entitled to collect IGST from the petitioner for an intra-State supply, and the petitioner subsequently paid the correct CGST/SGST, retaining the IGST would violate Article 265.
* Applying principles of restitution and unjust enrichment, the Court concluded that the Central Revenue was obligated to refund the IGST amount, as the taxpayer had already paid the correct tax to the State authorities for the same supply.
* The Court also noted that CBIC Circular No. 162/18/2021-GST dated 25.09.2021 clarifies that "subsequently held" includes self-realization by the taxpayer and provides for specific relevant dates for calculating limitation, which would make the petitioner's application timely in scenarios where correct tax was paid after the initial erroneous payment.
* Given that the respondent authorities did not dispute the fact of excess IGST payment and subsequent correct payment of CGST/SGST, but only raised the issue of limitation, the Court found the rejection solely on the ground of limitation to be contrary to facts and law.
* As the merits of the refund claim were not addressed by Respondent No. 3, the Court deemed it appropriate to set aside the rejection orders and remit the matter for a decision on merits.
6. Statutory References
* Constitution of India: Article 226, Article 265
* Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 19(1)
* Central Goods and Services Tax Act, 2017 (CGST Act): Section 77(1), Section 54
* Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 89(1A)
* Circular No. 162/18/2021-GST dated 25.09.2021 issued by CBIC
7. Precedents Cited
* Lenovo (India) Pvt. Ltd v. Joint Commissioner of GST (Appeals-1) - (2023) 12 Centax 230 (Mad.)
* Louis Dreyfus Company Pvt. Ltd. v. Union of India (2025) 33 Centax 418 (A.P.)
* Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax [W.P.Nos.18287 & 14905 of 2024] (A.P.)
* Comsol Energy Private Limited v. State of Gujarat (Gujarat High Court) (referred in Louis Dreyfus)
* Binani Cement Ltd. v. Union of India (2013) 288 ELT 193 (Guj) (referred in Comsol Energy)
* Gokul Agro Resources Ltd. v. Union of India (Special Civil Application No. 1758 of 2020) (Gujarat High Court) (referred in Comsol Energy)
* State of Madhya Pradesh v. Bhailal Bhai (Supreme Court) (referred in Louis Dreyfus)
* Mohit Minerals Pvt. Ltd. v. Union of India (Gujarat High Court & Supreme Court) (referred in Louis Dreyfus)
* Union of India v. Mohit Minerals (Supreme Court) (referred in Louis Dreyfus)
* Baburam v. C.C. Jacob (Supreme Court) (referred in Louis Dreyfus)
Key Legal Principles
- The Court highlighted Article 265 of the Constitution of India, stating that no tax can be collected without the authority of law. Since the Central GST authorities were not entitled to collect IGST from the petitioner for an intra-State supply, and the petitioner subsequently paid the correct CGST/SGST, retaining the IGST would violate Article 265.
- Applying principles of restitution and unjust enrichment, the Court concluded that the Central Revenue was obligated to refund the IGST amount, as the taxpayer had already paid the correct tax to the State authorities for the same supply.
- The Court also noted that CBIC Circular No. 162/18/2021-GST dated 25.09.2021 clarifies that "subsequently held" includes self-realization by the taxpayer and provides for specific relevant dates for calculating limitation, which would make the petitioner's application timely in scenarios where correct tax was paid after the initial erroneous payment.
- Given that the respondent authorities did not dispute the fact of excess IGST payment and subsequent correct payment of CGST/SGST, but only raised the issue of limitation, the Court found the rejection solely on the ground of limitation to be contrary to facts and law.
- As the merits of the refund claim were not addressed by Respondent No. 3, the Court deemed it appropriate to set aside the rejection orders and remit the matter for a decision on merits.