Gujarat High Court GST Refund
Aalidhra Texcraft Engineers vs. Revenue [Special Civil Application No. 14554 of 2024]
Background of the Case
The appellant, M/s Aalidhra Texcraft Engineers, a textile machinery manufacturer registered under GST, inadvertently paid Rs. 40 lakhs in November 2020 through Form DRC-03, believing it to be excess Input Tax Credit (ITC) claimed due to a system mismatch in GSTR-2A and GSTR-3B returns. The payment was voluntary, with no tax demand from authorities. In March 2024, during a departmental scrutiny, it was confirmed that no such liability existed, prompting the appellant to file a refund claim. However, the GST authorities rejected the claim, citing the two-year limitation under Section 54(1) of the CGST Act, 2017.
Arguments by the Appellant
The appellant contended that the payment was a voluntary deposit under mistake, not a tax liability, and thus outside Section 54(1)’s limitation. Further the department’s own audit (via Form GST ASMT-10) confirmed that the payment was erroneous, making the refund a matter of natural justice. The appellant also relied on precedents (Joshi Technologies and Gujarat State Police Housing Corporation) where courts held that voluntary deposits mistakenly made are refundable without time limits.
Respondent’s Response
The respondent, Revenue argued that the refund claim (filed in March 2024) was time-barred as it exceeded two years from the payment date (November 2020). Further stated that Section 54(1) and Explanation 2(h) mandate that refunds must be claimed within two years of payment, irrespective of the nature of deposit. The appellant’s delay was inexcusable, as the mistake could have been discovered earlier through reconciliation.
Court Findings and Decision
The Gujarat High Court, ruled in favor of the appellant, holding that Voluntary payments mistaken as tax are not governed by Section 54(1). The two-year limit applies only to tax refunds, not deposits made erroneously. Further held that retention of mistakenly paid amounts violates Article 265 of the Constitution, which prohibits tax collection without legal authority.
The court directed the department to refund Rs. 40 lakhs within 12 weeks, though denied interest since the payment was the appellant’s own mistake.
Gujarat High Court GST Refund
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