M/S Merek Life Science Private Limited vs The Union Of India on 7 November, 2025
AI Legal Insights
This GST case law examines the time limit for refund claims under Section 54 of the CGST Act, 2017. M/S Merek Life Science Private Limited sought a refund for Integrated Goods and Services Tax (IGST) paid on transactions initially considered inter-state supply but later determined to be intra-state. The Karnataka High Court addressed whether the refund claims were barred by limitation, considering principles of restitution and CBIC Circular No. 162. The core issue concerns the refund of wrongly paid IGST and its relation to the statutory time limits.
This ruling allows taxpayers to claim refunds for IGST erroneously paid and subsequently self-corrected as intra-state supply, even where initial timelines under Section 54 may have lapsed. It clarifies the applicability of refund provisions when tax is collected without legal authority, benefiting taxpayers in similar situations.
- IGST wrongly paid on intra-state supplies is not strictly "tax" under Section 54.
- Limitation under Section 54 doesn't apply when IGST is collected without legal authority.
- CBIC Circular 162 clarifies 'subsequently held' includes taxpayer's self-realization.
- Taxpayers are entitled to refunds based on principles of restitution and unjust enrichment.
- Authorities must consider refund claims on merits, even with limitation disputes.
QIs there a time limit to claim GST refund?
Yes, Section 54 of the CGST Act, 2017 specifies a time limit to claim a GST refund. However, this case clarifies that if the tax was wrongly collected (e.g., IGST instead of SGST/CGST), general limitation rules may not strictly apply.
QWhat happens if I paid the wrong GST?
If you've paid the wrong GST (e.g., IGST instead of CGST/SGST), you can claim a refund for the wrongly paid tax, and pay the correct taxes. This ruling supports refunds based on unjust enrichment, especially when self-identified and rectified.
QHow does self-realization affect GST refund claims?
CBIC Circular 162 clarifies that 'subsequently held' in refund provisions includes self-realization by the taxpayer. Therefore, a taxpayer discovering an error and correcting it themselves is still eligible to claim a refund of the wrongly paid tax, subject to other conditions.
Ruling Summary
Outcome**
The High Court allowed the writ petitions, set aside the impugned orders rejecting the refund applications, and held that the refund claims were not barred by limitation. The matters were remitted back to the Assistant Commissioner of Central Taxes (Respondent No.3) to pass appropriate orders on the refund applications on merits within three months.
2. Core Issue
The core issue was whether the refund claims for Integrated Goods and Services Tax (IGST) wrongly paid by the Petitioner (M/S Merek Life Science Private Limited) on transactions initially considered as inter-State supply but subsequently realized to be intra-State supply, were barred by limitation under Section 54 of the CGST Act, 2017, and Rule 89(1A) of the CGST Rules, 2017.
3. Key Facts
* The Petitioner, M/S Merek Life Science Private Limited, provides intermediary services to foreign entities.
* For the periods November 2017, July 2017, October 2017, August 2017, and September 2017, the Petitioner paid IGST under the bona fide belief that the services qualified as export of services (inter-State supply).
* Subsequently, the Petitioner realized that these services were actually intra-State supplies and accordingly paid State GST (SGST) under the Karnataka Goods and Services Tax Act, 2017, in March 2018.
* The Petitioner filed refund applications on March 30, 2024, with the Central Tax Authorities for the IGST amounts (e.g., Rs. 52,63,596/- for November 2017) wrongly paid.
* The Assistant Commissioner of Central Taxes (Respondent No.3) issued refund rejection notices on May 8, 2024, and subsequently passed impugned orders on May 25/27, 2024, rejecting the refund claims solely on the ground of being time-barred under Section 54 of the CGST Act, 2017.
* The Respondent-authorities did not dispute that the Petitioner had indeed made the excess IGST payments and subsequently paid the correct CGST/SGST.
4. Arguments
* 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, 2017, and Section 77(1) of the CGST Act, 2017, read with Rule 89(1A) of the CGST Rules, 2017, not Section 54 of the CGST Act.
* The IGST was collected without the authority of law, violating Article 265 of the Constitution of India, and therefore, Section 54 (which applies to refund of tax legitimately collected) is inapplicable.
* The Respondent-Central Authorities are not entitled to retain the amount under the principle of unjust enrichment, especially since the Petitioner subsequently paid the equivalent amount to the State GST Authorities.
* Reliance was placed on precedents from the High Courts of Madras and Andhra Pradesh, arguing that Section 54 of the CGST Act is directory in nature and not mandatory in such circumstances.
* CBIC Circular No. 162/18/2021-GST dated September 25, 2021, clarifies that "subsequently held" includes self-realization by the taxpayer and provides specific limitation periods for such refunds (two years from the date of payment of tax under the correct head, or two years from the notification date if payment was made before the notification).
* Revenue (The Union Of India, CBIC, Assistant Commissioner of Central Taxes):
* The refund applications were filed beyond the two-year period of limitation stipulated under Section 54 of the CGST Act, 2017, and Rule 89(1A) of the CGST Rules, 2017.
* These provisions (Section 54 and Rule 89(1A)) are mandatory, and any application filed beyond this period is not maintainable.
* The impugned orders were correctly passed after due verification and personal hearing.
5. Court’s Reasoning
* The Court noted that a plain reading of Section 77(1) of the CGST Act and Section 19(1) of the IGST Act clearly indicates an entitlement to refund for taxes paid by oversight, inadvertence, or erroneously.
* The Court relied on precedents from the Madras High Court (Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST) and the Andhra Pradesh High Court (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 is directory and not mandatory for claims where tax was collected without the authority of law.
* Citing Comsol Energy Private Limited v. State of Gujarat (followed in Louis Dreyfus) and Binani Cement Ltd. v. Union of India, the Court reiterated that an amount collected without the authority of law is not considered "tax" and therefore, Section 54, which pertains to the refund of tax, is not strictly applicable. Such collections are contrary to Article 265 of the Constitution.
* The Court found that the Central GST authorities were not entitled to collect IGST from the Petitioner, and upon the Petitioner paying the correct State GST, the Central government was obligated to refund the IGST based on the principles of restitution and unjust enrichment.
* The Court also noted that CBIC Circular No. 162/18/2021-GST dated September 25, 2021, clarified the interpretation of "subsequently held" to include self-realization by the taxpayer and provided specific limitation periods, which further supported the Petitioner's claim being within time.
* The Respondent's admission of the excess payment, while only contesting limitation, was crucial.
* Since Respondent No.3 had not considered the refund claim on merits, the Court deemed it appropriate to set aside the rejection orders and remand 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 54, Section 77(1), Section 168(1)
* Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 89(1A)
* Central Board of Indirect Taxes and Customs (CBIC) Circulars/Notifications:
* Circular No. 162/18/2021-GST dated September 25, 2021
* Notification No. 35/2021-Central Tax dated September 24, 2021
* Notification No. 13/2022-Central Tax dated July 5, 2022
* Other Acts/Rules cited in precedents (relevant for context):
* Limitation Act, 1963: Section 17(1)
* Special Economic Zones (SEZ) Rules, 2006: Rule 30(4)
* Notification No. 8/2017-GST and No. 10/2017-GST (struck down in Mohit Minerals)
* Notification No. 12 of 2017 - Central Tax (Rate) dated June 28, 2017 (Exemption for renting residential dwellings)
7. Precedents Cited
1. Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST (Appeals-1) - (2023) 12 Centax 230 (Mad.) (Madras High Court)
2. Louis Dreyfus Company Pvt. Ltd. v. Union of India - (2025) 33 Centax 418 (A.P.) (Andhra Pradesh High Court)
3. Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax - W.P.Nos.18287 and 14905 of 2024 (Andhra Pradesh High Court)
4. Mohit Minerals Pvt. Ltd. v. Union of India (Gujarat High Court)
5. Union of India v. Mohit Minerals (Supreme Court)
6. Baburam v. C.C. Jacob (Supreme Court)
7. Comsol Energy Private Limited v. State of Gujarat (Gujarat High Court)
8. Binani Cement Ltd. v. Union of India - (2013) 288 ELT 193 (Guj) (Gujarat High Court)
9. Gokul Agro Resources Ltd. v. Union of India - Special Civil Application No. 1758 of 2020 (Gujarat High Court)
10. State of Madhya Pradesh v. Bhailal Bhai (Supreme Court)
Key Legal Principles
- Citing *Comsol Energy Private Limited v. State of Gujarat* (followed in *Louis Dreyfus*) and *Binani Cement Ltd. v. Union of India*, the Court reiterated that an amount collected without the authority of law is not considered "tax" and therefore, Section 54, which pertains to the refund of *tax*, is not strictly applicable. Such collections are contrary to Article 265 of the Constitution.
- The Court found that the Central GST authorities were not entitled to collect IGST from the Petitioner, and upon the Petitioner paying the correct State GST, the Central government was obligated to refund the IGST based on the principles of restitution and unjust enrichment.
- The Court also noted that CBIC Circular No. 162/18/2021-GST dated September 25, 2021, clarified the interpretation of "subsequently held" to include self-realization by the taxpayer and provided specific limitation periods, which further supported the Petitioner's claim being within time.
- The Respondent's admission of the excess payment, while only contesting limitation, was crucial.
- Since Respondent No.3 had not considered the refund claim on merits, the Court deemed it appropriate to set aside the rejection orders and remand the matter for a decision on merits.