Limitation under Section 54 of GST Act Not Applicable for Mistaken Tax Payments, Court Directs Refund Processing
In a significant ruling, the Orissa High Court has quashed the rejection of a refund claim by the Joint Commissioner of State Tax, Cuttack. The court held that the state's retention of taxes erroneously paid under a mistaken belief violates Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law.
The case involved petitioner Rajendra Narayan Mohanty, who sought a refund of Rs. 12,03,290, paid twice under the Central Goods and Services Tax (CGST) and Odisha Goods and Services Tax (OGST) due to a mistaken notion. The Joint Commissioner had rejected the refund application on grounds of limitation as per Section 54 of the GST Act, 2017.
The division bench comprising Chief Justice Harish Tandon and Justice Murahari Sri. Raman observed that the limitation period prescribed under Section 54 is not applicable when the tax is paid by mistake. Citing precedent from both Delhi and Gujarat High Courts, the bench emphasized that taxes collected without authority must be refunded, and the period of limitation under the GST Act does not apply to such cases.
The court directed the petitioner to file a fresh refund application within two weeks and ordered the Joint Commissioner to process it in light of the judgment. The decision must be communicated within seven days of receiving the application, failing which the refund will attract an interest of 6% per annum.
The judgment underscores the principle that revenue authorities cannot retain excess tax payments when made under a mistaken belief, aligning with constitutional mandates and reinforcing taxpayer rights.
Bottom Line:
Excess tax paid erroneously or under mistaken notion cannot be retained by the State as it violates Article 265 of the Constitution of India. Limitation under Section 54 of the GST Act, 2017, is not applicable in such cases.
Statutory provision(s): Article 265 of the Constitution of India, Section 54 of the Central Goods and Services Tax Act, 2017
