GST Refund — Section 54 & 55 | Procedure, Time Limit & Inverted Duty

**1. Outcome** The High Court allowed the petitions, setting aside the impugned orders passed by Respondent No.3 (Assistant Commissioner of Central Taxes). It held that the taxpayer's refund applications/claims were **not barred by limitation**. The matters were remitted back to Respondent No.3 for passing appropriate orders on the refund applications on their merits, within a period of three months. **2. Core Issue** The core issue was whether the refund applications filed by the taxpayer for IGST erroneously paid on transactions (initially considered inter-State supply but subsequently held to be intra-State supply) were barred by the two-year period of limitation prescribed under Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules, 2017. **3. Key Facts** * M/s Merck Life Science Private Limited (taxpayer) is a company providing intermediary services to foreign entities. * For the periods November 2017, July 2017, October 2017, August 2017, and September 2017, the taxpayer initially paid Integrated Goods and Services Tax (IGST) to the Central Government, believing these services constituted "export of services" (inter-State supply). * Subsequently, the taxpayer realized these services were actually "intra-State supply" and accordingly paid the correct State Goods and Services Tax (SGST) to the State GST Authorities in March 2018. * The taxpayer filed refund applications with the Central Tax Authorities on 30.03.2024 to claim back the IGST erroneously paid. * Respondent No.3 (Assistant Commissioner of Central Taxes) rejected these refund applications through orders dated 25.05.2024 and 27.05.2024, solely on the ground that they were barred by limitation under Section 54 of the CGST Act. * The Revenue admitted that the taxpayer had paid IGST in excess to the Central Authorities and subsequently paid CGST/SGST for the same transactions to the State Authorities, disputing only the maintainability of the refund claims due to limitation. **4. Arguments (Taxpayer vs Revenue)** * **Taxpayer:** * The refund claim falls under Section 19(1) of the IGST Act and Section 77(1) of the CGST Act, read with Rule 89(1A) of the CGST Rules, which specifically address situations of tax wrongfully collected. * Section 54 of the CGST Act, prescribing a two-year limitation period, is directory in nature and not mandatory, as supported by judgments from the Madras and Andhra Pradesh High Courts. * The Central Authorities are not entitled to retain the erroneously paid IGST under the principle of unjust enrichment, especially since the correct tax (SGST) has already been paid to the State Authorities. Such retention would be against Article 265 of the Constitution (no tax without authority of law). * CBIC Circular No. 162/18/2021-GST clarifies that "subsequently held" (referring to the change in classification from inter-State to intra-State or vice-versa) includes self-realization by the taxpayer, further supporting the refund claim. * **Revenue:** * The refund applications filed on 30.03.2024 were beyond the statutory limitation period of two years prescribed by Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules, 2017. * These provisions for limitation are mandatory, and any application filed beyond this period is not maintainable. * The taxpayer failed to file the refund applications within the stipulated time, calculated to be by February 2024, taking into account Notification No.13/2022-Central Tax. * The department followed due process by issuing show-cause notices and granting personal hearings before rejecting the claims based on limitation. **5. Court’s Reasoning** * The Court found that Section 77(1) of the CGST Act and Section 19(1) of the IGST Act, read with Rule 89(1A) of the CGST Rules, are the relevant provisions for claiming refunds when tax is wrongfully paid due to misclassification of supply. * The Court highlighted the Revenue's admission that the IGST was paid in excess to the Central Authorities and the corresponding CGST/SGST was subsequently paid to the State Authorities, confirming the erroneous payment. * The Court heavily relied on precedents from the High Court of Madras (*Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST*) and the High Court of Andhra Pradesh (*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**, particularly in cases where tax is collected without the authority of law. * When tax is levied without the authority of law (violating Article 265 of the Constitution), such collection is not a valid "tax," but rather a payment made under a mistake of law. In such circumstances, the specific limitation under Section 54 of the GST Act may not apply, and general principles of restitution or the Limitation Act might be relevant. * Applying the principles of restitution and unjust enrichment, the Court held that the Central GST Authorities were not entitled to retain the IGST erroneously collected, especially since the correct State GST had been paid. The Central government was obligated to refund the IGST. * The Court concluded that the impugned orders, which rejected the refund claims solely on the ground of limitation, were contrary to facts and law. The refund claims were therefore deemed not barred by limitation. * Since Respondent No.3 had not decided the refund claims on their merits, the Court remitted the matters for fresh adjudication on merits. **6. Statutory References** * **Constitution of India:** Article 226, Article 265 * **Integrated Goods and Services Tax Act, 2017 (IGST Act):** Section 19(1), Section 16(3)(a), Section 16(3)(b) * **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), Rule 90(2), Rule 90(3), Rule 92(3) * **Limitation Act, 1963:** Section 17(1) (mentioned in cited precedents) * **Special Economic Zones (SEZ) Act** (mentioned in cited precedents) * **SEZ Rules, 2006:** Rule 30(4) (mentioned in cited precedents) * **Companies Act, 2013** **7. Precedents Cited** * *Lenovo (India) Pvt. Ltd. vs. Joint Commissioner of GST (Appeals-1)* - [(2023) 12 Centax 230 (Mad.)] (Madras High Court) * *Louis Dreyfus Company Pvt. Ltd. vs. Union of India* - [(2025) 33 Centax 418 (A.P.)] (Andhra Pradesh High Court) * *Nspira Management Services Private Limited vs. Assistant/Deputy Commissioner of Central Tax* - [W.P.Nos.18287 and 14905/2024 dated 26.09.2025] (Andhra Pradesh High Court) * *Mohit Minerals Pvt. Ltd. v. Union of India* (Gujarat High Court) * *Union of India v. Mohit Minerals* (Supreme Court) * *Baburam v. C.C. Jacob* (Supreme Court) * *Comsol Energy Private Limited v. State of Gujarat* (Gujarat High Court) * *Binani Cement Ltd. v. Union of India* - [(2013) 288 ELT 193 (Guj)] * *Gokul Agro Resources Ltd. v. Union of India* - (Special Civil Application No. 1758 of 2020, decided on 26.02.2020) * *State of Madhya Pradesh v. Bhailal Bhai* (Supreme Court) * **CBIC Circular No. 14 of 1955 dated April 11, 1955** * **CBIC Circular No.162/18/2021-GST dated 25th September, 2021**

Here is a summary of the judgment: **1. Outcome** The petitions are allowed. The impugned orders passed by the Assistant Commissioner of Central Taxes (Respondent No.3) rejecting the refund claims are set aside. The High Court held that the refund applications/claims of the petitioner are not barred by limitation. The matters are remitted back to Respondent No.3 to pass appropriate orders on the refund applications on merits, in accordance with law and the observations made by the Court, within three months. **2. Core Issue** The core issue is whether the refund applications for IGST wrongly paid on transactions initially considered as inter-state supply (export of services), but subsequently realized and correctly paid as intra-state supply (CGST/SGST), are barred by the two-year period of limitation prescribed under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) read with Rule 89(1A) of the CGST Rules, 2017. **3. Key Facts** * **Petitioner:** M/S Merck Life Science Private Limited, a science and technology company providing intermediary services to foreign entities. * **Disputed Periods:** November 2017, July 2017, October 2017, August 2017, and September 2017. * **Initial Payment:** Petitioner initially believed its services qualified as "export of services" (inter-state supply) and accordingly paid IGST (amounts ranging from Rs. 52,63,596/- to Rs. 82,91,091/- for various periods) in its GSTR-3B returns (filed between July 2017 to December 2017). * **Subsequent Realization & Correct Payment:** Petitioner later realized that the services were in fact "intra-state supply" and discharged/paid the correct State GST (CGST/SGST) in Form GSTR-3B in March 2018. * **Refund Application:** A refund application for the wrongly paid IGST was filed on 30.03.2024 with the Central Tax Authorities. * **Rejection by Authorities:** Respondent No.3 issued refund rejection notices (08.05.2024) and final orders (25.05.2024 & 27.05.2024), rejecting the claims solely on the ground of being barred by limitation under Section 54 of the CGST Act. * **Authorities' Admission:** The respondents, in their Statement of Objections, did not dispute that the petitioner had paid the IGST in excess and subsequently discharged the correct CGST/SGST, but maintained that the refund claim was time-barred. **4. Arguments (Taxpayer vs Revenue)** * **Taxpayer's Arguments:** * The power to grant refund for wrongly paid tax is derived 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 Section 54 of the CGST Act, which is inapplicable to such scenarios. * The Central Authorities are not entitled to retain the wrongly collected IGST, especially after the petitioner paid the correct tax to the State GST Authorities, citing the doctrine of unjust enrichment and Article 265 of the Constitution. * The two-year limitation period under Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules is directory, not mandatory, as held by the Madras and Andhra Pradesh High Courts in similar cases. * Relied on CBIC Circular No. 162/18/2021-GST, which clarifies that "subsequently held" includes self-realization by the taxpayer and sets out specific dates for calculating the limitation for refund claims under Section 77/19. * **Revenue's Arguments:** * The refund application filed on 30.03.2024 was beyond the two-year limitation period stipulated in Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules. * These provisions for limitation are mandatory, not directory. * The refund claims were rightly rejected as being time-barred, even if the fact of excess payment was not disputed. * The department followed due process, issued notices, and granted personal hearings before concluding that the claims were time-barred. **5. Court’s Reasoning** * **Reliance on Precedents:** The Court heavily relied on and expressly agreed with the principles laid down by the Madras High Court in *Lenovo (India) Pvt. Ltd v. Joint Commissioner of GST (Appeals-1)* and the Andhra Pradesh High Court in *Louis Dreyfus Company Pvt. Ltd. v. Union of India* and *Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax*. * **Limitation Period is Directory:** Following the cited precedents, the Court held that the two-year limitation period specified in Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules is directory in nature, not mandatory, particularly in cases of tax wrongly paid under a mistake of law. * **Constitutional Mandate & Unjust Enrichment:** Reiterated that under Article 265 of the Constitution, no tax can be collected without the authority of law. Since the IGST was wrongly paid and the correct state taxes were subsequently paid, the Central GST authorities were not entitled to retain the IGST. Principles of restitution and unjust enrichment necessitate the refund. * **CBIC Circular on "Subsequently Held":** Acknowledged CBIC Circular No. 162/18/2021-GST, which clarifies that the term "subsequently held" in Section 77 (CGST Act) and Section 19 (IGST Act) includes situations where the taxpayer himself realizes the error. The Circular also provides that the limitation period for such refunds starts from the date of payment of tax under the correct head, or from 24.09.2021 (the date of notification of Rule 89(1A)) if the correct payment was made earlier. * **Admission of Facts:** The Court noted that the respondents did not dispute the factual matrix of the petitioner having wrongly paid IGST and subsequently having paid the correct CGST/SGST. Their sole ground for rejection was limitation. * **Remand for Merits:** Since the Assistant Commissioner had only rejected the claims on the ground of limitation without addressing the merits of the refund, the Court deemed it appropriate to set aside the rejection orders and remand the matter for a decision on the merits. **6. Statutory References** * Article 226 of the Constitution of India * Article 265 of the Constitution of India * Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 16(3)(a), 16(3)(b), 19(1) * Central Goods and Services Tax Act, 2017 (CGST Act): Section 34, 39, 49(6), 54(1) to (14) (and its Explanation), 55, 56, 57, 77(1), 77(2), 168(1) * Karnataka Goods and Services Tax Act, 2017 * Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 89(1A), 89(2), 89(3), 90(2), 90(3), 92(3); Forms GST RFD-01, RFD-02, RFD-03, RFD-06, RFD-08, RFD-09 * Limitation Act, 1963: Section 17(1) * Special Economic Zones Act, 2005 (SEZ Act): Section 16 * Special Economic Zones Rules, 2006 (SEZ Rules): Rule 30(4) * United Nations (Privileges and Immunities) Act, 1947 * Notification No. 8/2017-GST and Notification No. 10/2017-GST * Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 * Notification No. 13/2022-Central Tax dated 05.07.2022 * Notification No. 35/2021-Central Tax dated 24.09.2021 * Circular No. 125/44/2019-GST dated 18.11.2019 (CBIC) * Circular No. 162/18/2021-GST dated 25.09.2021 (CBIC) * CBDT Circular No. 14 of 1955 dated 11.04.1955 **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.) [14-08-2025] * *Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax* [W.P.Nos.18287 & 14905 of 2024] (Andhra Pradesh High Court) * *Mohit Minerals Pvt. Ltd. v. Union of India* (Gujarat High Court decision dated 23.01.2020) * *Union of India v. Mohit Minerals* (Supreme Court decision dated 19.05.2022) * *Comsol Energy Private Limited v. State of Gujarat* (Gujarat High Court) * *Binani Cement Ltd. v. Union of India*, (2013) 288 ELT 193 (Guj) * *Gokul Agro Resources Ltd. v. Union of India* (Special Civil Application No. 1758 of 2020, decided on 26.02.2020) (Gujarat High Court) * *State of Madhya Pradesh v. Bhailal Bhai* (Supreme Court) * *Baburam v. C.C. Jacob* (Supreme Court) * *Sabharwal case*, [(1995) 2 SCC 745: 1995 SCC (L&S) 548: (1995) 29 ATC 481] (referred in *Baburam v. C.C. Jacob*)

**M/S Merek Life Science Private Limited vs The Union Of India on 7 November, 2025** **1. Outcome** The Karnataka High Court allowed the petitions, set aside the impugned orders rejecting the refund claims on grounds of limitation, held that the refund claims were not barred by limitation, and remitted the matters back to the Assistant Commissioner of Central Taxes for passing fresh orders on the merits of the refund applications 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 on services initially considered as inter-state supply but later determined to be intra-state supply (for which CGST and SGST were subsequently paid), were barred by the two-year limitation period prescribed under Section 54 of the CGST Act, 2017, read with Rule 89(1A) of the CGST Rules, 2017. A subsidiary issue was whether these statutory provisions are mandatory or directory. **3. Key Facts** * M/s Merek Life Science Private Limited, a Science and Technology Company, provides intermediary services to foreign entities. * For the periods of November 2017, July 2017, October 2017, August 2017, and September 2017, the petitioner, under a bonafide belief, paid IGST on these services, considering them as export of services (inter-state supply). * Subsequently, the petitioner realized that these services were actually intra-state supplies and accordingly discharged State GST (CGST and SGST) by making payments in Form GSTR-3B for March 2018. * The petitioner filed refund applications on 30.03.2024 with the Central Tax Authorities, seeking a refund of the wrongly paid IGST amounts (e.g., Rs. 52,63,596/-, Rs. 82,91,091/-, Rs. 69,88,339/-, Rs. 54,52,930/-, Rs. 52,72,686/-). * The Assistant Commissioner of Central Taxes (Respondent No. 3) issued refund rejection notices and impugned orders (dated 25.05.2024 and 27.05.2024), rejecting the refund claims solely on the ground that they were barred by limitation under Section 54 of the CGST Act. * The Revenue did not dispute that the IGST was paid in excess and that the correct CGST/SGST was subsequently paid for the same transactions. **4. Arguments** * **Taxpayer (M/s Merek Life Science Private Limited):** * The refund claims arise from tax wrongly paid due to a bonafide mistake (treating intra-state supply as inter-state supply). * The power to grant such refunds stems 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. Section 54 of the CGST Act, dealing with general refund claims, is not applicable in this specific scenario. * The Central Authorities are not entitled to retain tax collected without the authority of law, especially when the correct tax has been paid to the State Authorities. This violates Article 265 of the Constitution and the principle of unjust enrichment. * The limitation period under Section 54 of the CGST Act and Rule 89(1A) is directory, not mandatory, as supported by judicial precedents from other High Courts. * Relied on CBIC Circular No. 162/18/2021-GST dated 25.09.2021, which clarifies the interpretation of "subsequently held" to include self-realization of incorrect supply type and sets the relevant date for limitation under Rule 89(1A). * **Revenue (Union of India, CBIC, Assistant Commissioner):** * The refund applications were filed beyond the two-year limitation period stipulated in Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules. * These provisions are mandatory, and thus, applications filed beyond the prescribed period are not maintainable and were correctly rejected. * The department merely followed the law by verifying the claim, issuing a show cause notice, granting a hearing, and passing a speaking order rejecting the claim due to time limitation. **5. Court’s Reasoning** * **Interpretation of Statutory Provisions:** The Court examined Section 77(1) of the CGST Act and Section 19(1) of the IGST Act, which specifically provide for refunds when tax is wrongfully paid on a transaction initially considered as intra-state/inter-state but subsequently held to be the other type of supply. Rule 89(1A) of the CGST Rules prescribes the manner and conditions for such refunds, including a two-year period from the date of payment of tax under the correct head or from the notification date of the rule (24.09.2021) if payment was earlier. * **Revenue's Admission:** The Court noted that the respondents admitted the petitioner’s excess IGST payment to the Central Authorities and the subsequent correct payment of CGST/SGST to the State Authorities. The only point of contention was limitation. * **Precedents on Limitation:** The Court relied heavily on the Madras High Court judgment in *Lenovo (India) Pvt. Ltd.* and the Andhra Pradesh High Court judgments in *Louis Dreyfus Company Pvt. Ltd.* and *Nspira Management Services Private Limited*. These judgments uniformly held that: * Section 54 of the CGST Act and Rule 89(1A) are directory, not mandatory, for refunds of tax paid under a mistake of law or without authority of law. * Where tax is collected without authority of law (violating Article 265 of the Constitution), it does not constitute a "tax" under the GST Act, and therefore, the limitation period under Section 54 does not apply. In such cases, Section 17 of the Limitation Act, 1963 (for relief from consequences of a mistake) would apply, with the limitation period commencing from the date the mistake is discovered. * The department has a duty to assist taxpayers in rectifying deficiencies, and legitimate refund claims should not be denied due to technical irregularities or delays in document submission if the initial application was within time. * **Constitutional Mandate and Unjust Enrichment:** The Court emphasized Article 265, stating that the Central GST authorities had no legal authority to collect the IGST once it was established that the supply was intra-state. Retaining this amount, especially after the correct tax was paid to the State, would amount to unjust enrichment and violate constitutional principles. * **Conclusion:** The Court concluded that the impugned orders rejecting the refund claims based on limitation were contrary to law and facts. The refund claims were therefore not barred by limitation. * **Remand for Merits:** As the Assistant Commissioner had not adjudicated the refund claims on their merits but only rejected them on limitation, the Court remitted the cases for fresh consideration and orders on the refund applications within the stipulated timeframe, incorporating the Court's observations. **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) * **Notifications & Circulars:** * CBIC Circular No. 162/18/2021-GST dated 25.09.2021 * Notification No. 35/2021-Central Tax dated 24.09.2021 **7. Precedents Cited** * **Lenovo (India) Pvt. Ltd. v. Joint Commissioner of GST (Appeals-1) - [(2023) 12 Centax 230 (Mad.)]:** Madras High Court held Section 54 of CGST Act to be directory and emphasized the department's duty to assist taxpayers for legitimate refunds, not rejecting on technicalities or delay in submitting supporting documents if the application was timely. * **Louis Dreyfus Company Pvt. Ltd. v. Union of India - (2025) 33 Centax 418 (A.P.):** Andhra Pradesh High Court held that tax collected without authority of law is not "tax" under the GST Act, thus Section 54 limitation does not apply; Section 17 of the Limitation Act, 1963 applies for claims made under a mistake of law. * **Nspira Management Services Private Limited v. Assistant/Deputy Commissioner of Central Tax - W.P.Nos.18287 & 14905 of 2024 (A.P., dated 26.09.2025):** Andhra Pradesh High Court reiterated the principles from *Louis Dreyfus*, directing reconsideration of refund applications without invoking limitation where tax was wrongly paid for exempted services. * **Comsol Energy Private Limited v. State of Gujarat (Gujarat High Court):** (Cited in AP High Court judgments) Held Section 54 of CGST Act inapplicable for amounts collected without authority of law (violating Article 265), and Section 17 of the Limitation Act applies. * **Binani Cement Ltd. v. Union of India, (2013) 288 ELT 193 (Guj):** (Cited in Gujarat High Court judgments) Held that illegal duty collection violates Article 265, and special law limitation doesn't apply; Limitation Act applies. * **Gokul Agro Resources Ltd. v. Union of India (Gujarat High Court, Special Civil Application No. 1758 of 2020):** (Cited in Gujarat High Court judgments) Directed processing of refund for wrongly paid IGST without raising technical issues. * **State of Madhya Pradesh v. Bhailal Bhai (Hon'ble Supreme Court):** (Cited in AP High Court judgments) Held that High Courts can direct refund of money realized by the government without authority of law under Article 226. * **Union of India v. Mohit Minerals (Hon'ble Supreme Court, 19.05.2022) & Mohit Minerals Pvt. Ltd. v. Union of India (Gujarat High Court, 23.01.2020):** (Cited in AP High Court judgments) Judgments striking down notifications imposing GST on ocean freight, establishing that such collections were without authority of law, and that the Supreme Court's declaration of law was retrospective. * **Baburam v. C.C. Jacob (Hon'ble Supreme Court):** (Cited by Revenue in Louis Dreyfus, distinguished by AP High Court) Concerned prospective application of law, which was deemed inapplicable to the *Mohit Minerals* context.

**Judgment 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)** * **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). * **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)

Here is a summary of the judgment: **1. 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)

Here is a summary of the judgment: --- **1. Outcome** The Madras High Court allowed the Writ Petitions (W.P.Nos.6524, 6527 and 6537 of 2022) filed by M/s. Gillette Diversified Operations Private Limited, setting aside the impugned orders rejecting their refund claims. Consequently, the related Writ Petitions (W.P.Nos.6531 and 6541 of 2022) challenging Circular No.125/44/2019-GST and seeking retrospective application of the proviso to Rule 90(3) of the CGST Rules, 2017, were closed as it became unnecessary to address them on merits. **2. Core Issue** The core issue was whether the petitioner's refund claims for unutilized Input Tax Credit (ITC) on zero-rated supplies (exports) were filed within the two-year limitation period prescribed under Section 54 of the CGST Act, 2017, especially considering multiple filings (initial portal, manual, and re-presentation after deficiency) and the interpretative circulars issued by the CBIC. **3. Key Facts** * **Petitioner:** M/s. Gillette Diversified Operations Private Limited. * **Nature of Claims:** Refund of unutilized ITC on zero-rated supplies (export of goods without payment of tax) for the periods July 2017, August 2017, and September 2017. * **Initial Filing:** Claims were initially filed on the GST portal on 21.09.2018, 09.10.2018, and 10.10.2018. * **Manual Filing:** Subsequently filed manually on 28.03.2019 due to the GST portal's incomplete functionality. * **Deficiency Memo:** Deficiency memos were issued on 12.04.2019. * **Re-presentation:** The rectified refund claims were re-presented on 18.10.2019 and acknowledged on 01.11.2019. * **Rejection by Authorities:** The refund claims were rejected by the Assistant Commissioner and upheld by the Joint Commissioner (Appeals-II) on the ground of limitation, considering the date of re-presentation (18.10.2019) as the filing date and relying on Circular No.125/44/2019 dated 18.11.2019. * **Jurisdiction:** The petitioner approached the High Court due to the non-constitution of the GST Appellate Tribunal. **4. Arguments (Taxpayer vs Revenue)** * **Taxpayer (M/s. Gillette Diversified Operations):** * The refund claims were for unutilized ITC on zero-rated supplies (exports), not for inverted duty structure. * The initial claims filed on the portal in September and October 2018 were well within the two-year limitation period from the "relevant date" (date of export as per Explanation 2(a) to Section 54). * The re-submission of claims after rectifying deficiencies should not be treated as a "fresh refund application" for limitation purposes, particularly given the initial filing was within time. * Challenged Paragraph 12 of Circular No.125/44/2019 dated 18.11.2019, which mandates that a rectified application is a fresh one and subject to the original limitation, arguing it is *ultra vires* Section 54 of the CGST Act. * Argued that the proviso to Rule 90(3) of the CGST Rules, 2017 (inserted w.e.f. 18.05.2021), which excludes the period from initial filing to deficiency memo for limitation purposes, should be applied retrospectively. * The amendment to Explanation 2(e) to Section 54 (w.e.f. 01.02.2019), which defines "relevant date" for inverted duty structure, is not applicable to their export-related refund claims. * Cited *Universal Drinks Private Limited, Nagpur Vs. Union of India and another*. * **Revenue (GST Department):** * The "relevant date" for export of goods is defined under Explanation 2(a)(i) to Section 54 of the CGST Act (date of departure of conveyance). * As per Rule 90(3) of the CGST Rules, 2017, and Paragraph 12 of Circular No.125/44/2019, a refund application filed after correction of deficiencies is treated as a "fresh refund application" and must be filed within two years of the relevant date. * Since the re-filed claims were submitted on 18.10.2019, they were beyond two years from the dates of export (July-Sept 2017), hence time-barred. * Circular No.125/44/2019 is *intra vires* the CGST and IGST Acts and Rules 89 and 90. * Explanation 2(e) to Section 54, as amended, applies specifically to inverted tax structure, not to export claims for ITC refund. **5. Court’s Reasoning** * The court noted that the exports occurred in July-September 2017. The initial refund claims were filed on the portal in September-October 2018, which was clearly within the two-year limitation period from the date of exports (relevant date as per Explanation 2(a) to Section 54). * It acknowledged that during the initial period of GST implementation, the electronic refund module was not fully operational, necessitating a hybrid system of electronic filing (FORM GST RFD-01A) and manual submission of supporting documents and subsequent processing stages, as explained in Circular No.125/44/2019. * The court distinguished the nature of the petitioner's claim: it was for refund of unutilized ITC on *zero-rated supplies (exports)* under Section 16(3)(a) of the IGST Act, not for inverted duty structure. * Therefore, the "relevant date" for these claims was governed by Explanation 2(a) to Section 54 (date of export), and not Explanation 2(e) to Section 54 (which pertains to inverted tax structure and was later amended to clarify its scope). The amendment to Explanation 2(e) effective from 01.02.2019 was thus irrelevant to the petitioner's case. * Since the initial claims were filed within two years from the relevant date, the subsequent re-presentation after correcting deficiencies, necessitated by procedural issues and deficiency memos, did not render the original application time-barred. The department's argument that re-filing constituted a "fresh application" for limitation purposes was found incorrect. * Given the finding that the original claims were filed in time and were therefore maintainable, the court deemed it unnecessary to delve into the challenge against Paragraph 12 of Circular No.125/44/2019 or the retrospective application of the proviso to Rule 90(3) of the CGST Rules. * The court emphasized that legitimate export incentives should be granted upon substantial compliance. **6. Statutory References** * **Constitution of India:** Article 226 * **Central Goods and Services Tax (CGST) Act, 2017:** * Section 2(106) (definition of "tax period") * Section 39 (furnishing of return) * Section 49(6) (electronic cash ledger) * Section 50 (interest) * Section 54 (Refund of Tax) – especially Sub-sections (1), (3), and Explanation 2(a), 2(c), 2(d), 2(e), 2(f), 2(g), 2(h) * Section 112 (Appellate Tribunal) * **Central Goods and Services Tax (CGST) Rules, 2017:** * Rule 89 (Application for refund) * Rule 90(3) and its Proviso (Acknowledgement, deficiency memo) * FORM GST RFD-01A, FORM GST RFD-03 * **Integrated Goods and Services Tax (IGST) Act, 2017:** * Section 16(1), (2), (3) (unamended and amended versions) (Zero rated supply) * Section 17 * **CGST Amendment Act, 2018 (31/2018)** * **Finance Act, 2021** * **Foreign Exchange Management Act, 1999 (42 of 1999)** **7. Precedents Cited** * **Case Law:** * M/s.Gillette Diversified Operations vs The Joint Commissioner Of Gst And ... on 5 February, 2025 (The instant judgment) * *Universal Drinks Private Limited, Nagpur Vs. Union of India and another*, 1984 (18) E.L.T. 207 (Bom.) (Cited by Petitioner) * **Circulars & Notifications:** * Circular No.17/17/2017-GST dated 15.11.2017 (Cited by Revenue) * Circular No.59/33/2018 dated 04.09.2018 (Cited in impugned order) * Circular No.79/53/2018-GST dated 31.12.2018 (Cited by Court and Petitioner) * Circular No.125/44/2019-GST dated 18.11.2019 (Impugned by Petitioner, relied upon by Revenue) * Notification No.02/2019-CT dated 20.01.2019 (Amending Section 54, w.e.f. 01.02.2019) * Notification No.15/2021-Central Tax (CT) dated 18.05.2021 (Inserting proviso to Rule 90(3), w.e.f. 18.05.2021) ---