ADVERTISEMENT
Karnataka High Court
Assistant Commissioner Of Central … vs M/S Merck Life Science Private Limited on 17 March, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
Reserved on : 20.02.2026
Pronounced on : 17.03.2026 R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF MARCH, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT APPEAL No. 110 OF 2026 (T-RES)
C/W
WRIT APPEAL No. 119 OF 2026 (T-RES)
WRIT APPEAL No. 122 OF 2026 (T-RES)
WRIT APPEAL No. 126 OF 2026 (T-RES)
WRIT APPEAL No. 140 OF 2026 (T-RES)
IN WA No. 110/2026
BETWEEN:
Digitally signed
by VINUTHA B
S 1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
Location: High
Court of NORTH WEST DIVISION-1,
Karnataka NORTH WEST COMMISSIONERATE,
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.
2. CENTRAL BOARD OF INDIRECT TAXES AND
CUSTOMS,
REPRESENTED HEREIN BY
THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
3. THE UNION OF INDIA
REPRESENTED HEREIN BY
THE SECRETARY
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
AND:
1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
REPRESENTED BY ITS AUTHORISED SIGNATORY
MS. SNEHA PATIL,
AGED ABOUT 35 YEARS,
DAUGHTER OF PANDURANG PATIL,
HAVING OFFICE AT GODREJ ONE,
8TH FLOOR, PRIOJSHA NAGAR,
EASTERN EXPRESS HIGHWAY,
VIKHROLI (EAST) MUMBAI - 400 079.
...RESPONDENT
(BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)
THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA
HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED
BY THE LEARNED SINGLE JUDGE IN WP No.27259/2024 (T-
RES) DATED 07.11.2025.
IN WA No.119/2026
BETWEEN:
1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
NORTH WEST DIVISION-1,
NORTH WEST COMMISSIONERATE,
-3-
WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.
2. CENTRAL BOARD OF INDIRECT TAXES
AND CUSTOMS
REPRESENTED HEREIN BY
THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
3. THE UNION OF INDIA
REPRESENTED HEREIN BY
THE SECRETARY
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
AND:
1. M/S. MERCK LIFE SCIENCE PRIVATE LIMITED
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MS. SNEHA PATIL,
AGED ABOUT 35 YEARS,
DAUGHTER OF PANDURANG PATIL,
HAVING OFFICE AT GODREJ ONE,
8TH FLOOR, PRIOJSHA NAGAR,
EASTERN EXPRESS HIGHWAY,
VIKHROLI (EAST), MUMBAI - 400 079.
...RESPONDENT
(BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
27691/2024 (T-RES) DATED 07.11.2025.
IN WA No. 122/2026
BETWEEN:
1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
NORTH WEST DIVISION-1,
NORTH WEST COMMISSIONERATE,
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.
2. CENTRAL BOARD OF INDIRECT TAXES
AND CUSTOMS
REPRESENTED HEREIN BY
THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA,
NORTH BLOCK,
NEW DELHI - 110 001.
3. THE UNION OF INDIA
REPRESENTED HEREIN BY
THE SECRETARY
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA,
NORTH BLOCK,
NEW DELHI - 110 001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
AND:
1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MS. SNEHA PATIL,
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
AGED ABOUT 35 YEARS,
DAUGHTER OF PANDURANG PATIL,
HAVING OFFICE AT GODREJ ONE,
8TH FLOOR, PRIOJSHA NAGAR,
EASTERN EXPRESS HIGHWAY,
VIKHROLI (EAST),
MUMBAI - 400 079.
...RESPONDENT
(BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
28151/2024 (T-RES) DATED 07.11.2025.
IN WA No. 126/2026
BETWEEN:
1. ASSISTANT COMMISSIONER OF CENTRAL TAXES,
NORTH WEST DIVISION-1,
NORTH WEST COMMISSIONERATE,
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.
2. CENTRAL BOARD OF INDIRECT TAXES
AND CUSTOMS
REPRESENTED HEREIN BY
THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
3. THE UNION OF INDIA
REPRESENTED HEREIN BY
THE SECRETARY
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
AND:
1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MS. SNEHA PATIL,
AGED ABOUT 35 YEARS,
DAUGHTER OF PANDURANG PATIL,
HAVING OFFICE AT GODREJ ONE,
8TH FLOOR, PRIOJSHA NAGAR,
EASTERN EXPRESS HIGHWAY,
VIKHROLI (EAST) MUMBAI - 400 079.
...RESPONDENT
(BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
27691/2024 (T-RES) DATED 07.11.2025.
IN WA No. 140/2026
BETWEEN:
1. ASSISTANT COMMISSIONER OF
CENTRAL TAXES
NORTH WEST DIVISION-1,
NORTH WEST COMMISSIONERATE,
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.
2. CENTRAL BOARD OF INDIRECT TAXES
AND CUSTOMS
REPRESENTED HEREIN BY
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
3. THE UNION OF INDIA
REPRESENTED HEREIN BY THE SECRETARY
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE
GOVERNMENT OF INDIA,
NORTH BLOCK,
NEW DELHI - 110 001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
AND:
1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MS. SNEHA PATIL,
AGED ABOUT 35 YEARS,
DAUGHTER OF PANDURANG PATIL,
HAVING OFFICE AT GODREJ ONE,
8TH FLOOR, PRIOJSHA NAGAR,
EASTERN EXPRESS HIGHWAY,
VIKHROLI (EAST)
MUMBAI - 400 079.
...RESPONDENT
(BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP
No.27261/2024 DATED 07.11.2025 AND PASS SUCH OTHER
SUITABLE ORDERS.
THESE APPEALS HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS
DAY, K.V. ARAVIND J., DELIVERED THE FOLLOWING:-
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
C.A.V. ORDER
(PER HON'BLE Mr. JUSTICE K. V. ARAVIND)
Heard Sri Aravind V. Chavan, learned Senior Standing
Counsel for the appellants-Revenue and Sri Bharath B.
Raichandani, learned counsel for the respondent-Assessee.
2. The Revenue has preferred these intra-Court appeals
under Section 4 of the Karnataka High Court Act, 1961,
impugning the order dated 07.11.2025 passed by the learned
Single Judge in W.P. No.27259/2024 (T-RES) and four other
petitions.
All the appeals raise common questions. Learned counsel
appearing on both sides addressed common submissions.
Hence, the appeals are disposed by common judgment.
For convenience, the facts in Writ Appeal No.110/2026
are referred.
A. Facts in brief:
3. The respondent-assessee is a company engaged in the
business of healthcare, life sciences, and electronics, providing
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AND 2 OTHERS
intermediary services to foreign entities and earning
commission income therefrom. The assessee filed its return in
Form GSTR-3B for the tax period October 2017 and paid
Integrated Goods and Services Tax (IGST). Subsequently, the
assessee filed another return in Form GSTR-3B in March 2018
and paid Central Goods and Services Tax (CGST) and State
Goods and Services Tax (SGST).
3.1 In the return filed earlier, the services were treated as
"export of services", and IGST was paid. However, in the return
filed in March 2018, the assessee paid CGST and SGST,
treating the transaction as intra-State supplies. It is stated that
the erroneous payment of IGST was not refunded. Notification
No.35/2021-Central Tax dated 24.09.2021 inserted Rule
89(1A) of the Central Goods and Services Tax Rules, 2017 (for
short, "CGST Rules"), prescribing the procedure and timelines
for claiming refund.
3.2 It is further stated that circulars were issued by the GST
authorities to give effect to Rule 89(1A). The application filed
by the assessee under Section 54 of the Central Goods and
Services Tax Act, 2017 (for short, "CGST Act") came to be
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WA No. 122 of 2026
AND 2 OTHERS
rejected on the ground that it was filed beyond the prescribed
period. It was held that although Rule 89(1A) came into effect
from 24.09.2021, a period of two years was provided to claim
refund in respect of cases that had arisen prior to the Rules
coming into force. The application for refund filed by the
assessee is dated 30.03.2024. Accordingly, by order dated
27.05.2024 at Annexure-B, the claim for refund was rejected.
Aggrieved by the order rejecting the refund, the assessee
preferred a writ petition.
3.3 In the impugned order, the learned Single Judge allowed
the writ petition. The learned Single Judge, while setting aside
the order rejecting the refund, held that Section 54 of the CGST
Act and Rule 89(1A) of the CGST Rules are directory in nature
and not mandatory. The learned Single Judge further held that
the wrongful payment of IGST is not disputed by the
authorities, and therefore, the rejection of the refund claim due
to it being filed belatedly is incorrect. While holding so, the
learned Single Judge declared that the refund application is not
belated and directed the authorities to pass appropriate orders
on the refund application within the prescribed time frame.
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS
B. Submissions:
(i). On behalf of Revenue;
4. Sri Aravind V. Chavan, learned Senior Standing Counsel
for the appellants-Revenue, submits that Section 54 enables a
claim for refund of any tax. The provision prescribes a period of
two years from the relevant date, within which such claim is
required to be made in the prescribed form and manner. It is
further submitted that the period of two years prescribed under
Section 54 is mandatory. According to the learned counsel,
declaring the time limit under Section 54 as directory, as held
by the learned Single Judge, would amount to re-writing the
statutory provision, which is impermissible in law.
4.1 The learned Senior Standing Counsel further submits that
sub-rule (1A) of Rule 89 came into effect from 24.09.2021.
Since the prescribed Form was not available till that date, the
proviso to sub-rule (1A) of Rule 89 provided a period of two
years from the date on which the sub-rule came into force for
claiming refund. It is submitted that the refund claim was not
made either within the period prescribed under Section 54 or
within the time stipulated under Rule 89(1A). The assessee,
having failed to claim the refund within the prescribed time,
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AND 2 OTHERS
cannot now seek the benefit of refund, which would otherwise
amount to unjust enrichment.
4.2 It is further submitted that when a specific procedure and
timelines are prescribed for claiming refund, the same must
necessarily be complied with within the stipulated period.
According to the learned counsel, the time limit prescribed has
relevance to other adjudicatory procedures under the Act. If
the period of limitation prescribed under Section 54 is
construed as directory and not mandatory, and consequently
no limitation is enforced, the other adjudicatory proceedings
under the Act, which are intended to be time-bound, would be
rendered nugatory.
4.3 It is further submitted that the learned Single Judge has
not considered the object of prescribing the timeline under
Section 54, and that the said provision is mandatory in nature.
It is contended that the authorities, being bound by the
provisions of the Act and the Rules, have acted strictly in
accordance with the plain language of the statute, and
therefore cannot be said to have committed any error in law.
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AND 2 OTHERS
4.4 With the above submissions, the learned Senior Standing
Counsel contends that the order passed by the learned Single
Judge is unsustainable in law. It is submitted that the order
rejecting the refund claim is justified. Accordingly, he prays
that the writ appeal be allowed.
(ii). On behalf of Assessee;
5. Sri Bharath B. Raichandani, learned counsel for the
respondent-assessee, submits that the assessee had initially
treated the services rendered as "export of services" and
accordingly paid IGST to the Central Government.
Subsequently, upon realizing that the transaction constituted
an intra-State supply, the assessee paid SGST. In view of the
payment of both IGST and SGST, the assessee filed an
application for refund under Section 54 of the Act on
30.03.2024.
5.1 It is submitted that Section 54 of the Act enables an
assessee to claim refund by making an application before the
expiry of two years from the relevant date, in such manner as
may be prescribed. It is further submitted that the rules
governing refund were notified only later by inserting sub-rule
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AND 2 OTHERS
(1A) to Rule 89, which came into effect from 24.09.2021. It is
contended that though the GST in question was paid during
several months in the year 2017, the mechanism for claiming
refund was provided only from 24.09.2021. Therefore,
according to the learned counsel, the plain reading of Section
54 of the Act indicates that filing an application within two
years from the relevant date is directory in nature and not
mandatory.
5.2 The learned counsel further submits that when tax is paid
without authority of law, the timeline prescribed under Section
54 of the Act is not applicable. It is contended that the Revenue
can retain taxes only in accordance with law, as mandated
under Article 265 of the Constitution of India. It is further
submitted that if the refund is denied on technical grounds, the
same would result in unjust enrichment in the hands of the
Revenue.
5.3. The learned counsel further submits that, having regard
to the facts of the present case, the taxes were paid twice,
once as IGST and again as CGST & SGST. Therefore, the
incorrect payment of IGST is liable to be refunded without
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raising any plea based on technicalities. It is submitted that the
refund application dated 30.03.2024 was filed within a
reasonable time, and the learned Single Judge was justified in
directing the authorities to process the refund application by
holding that an application under Section 54 is not governed by
any limitation. Accordingly, he prays that the appeal be
dismissed.
C. Points for Consideration:
6. Having considered the submissions made by the learned
counsel for the parties and upon perusal of the appeal papers,
the following points arise for consideration by this Court:
(i) Whether filing of an application within the time
provided under Section 54 of the CGST Act is
mandatory?
(ii) If Point No.(i) is answered in the affirmative, is the
Assessee/registered person left with no remedy to
claim genuine refunds?
(iii) What is the mechanism to condone the delay in
filing the refund application under Section 54 of
CGST Act.
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D. Scheme of GST Act:
7. Before proceeding to answer the above points, it is
necessary to analyze the scheme of the Act.
7.1 Chapter III of the Act deals with the levy and collection of
tax. This Chapter provides for the scope of supply, liability, levy
and collection of tax, and the power to grant exemption from
the levy of tax.
7.2 Chapter V deals with Input Tax Credit in respect of taxes
paid on the supply of goods or services used in the course or
furtherance of business.
7.3 Chapter VII deals with Tax Invoice, Credit and Debit
Notes. Section 31 mandates that a registered person supplying
taxable goods shall, before or at the time of removal of the
goods for supply to the recipient, or at the time of delivery of
goods or making them available to the recipient, issue a tax
invoice showing the description, quantity and value of goods,
the tax charged thereon, and such other prescribed particulars.
7.4 Chapter VIII deals with Accounts and Records, requiring a
registered person to maintain true and correct accounts of
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AND 2 OTHERS
production or manufacture of goods, inward and outward
supply of goods or services, stock of goods, input tax credit
availed, output tax payable or paid, and such other particulars
as may be prescribed. Section 36 requires a registered person
to keep and maintain books of account and other records until
the expiry of seventy-two months from the due date of
furnishing the annual return for the year to which such
accounts and records pertain.
7.5 Chapter IX deals with the furnishing of returns, including
details of outward supplies, inward supplies, and availment of
input tax credit. Section 44 provides for the filing of an annual
return by a registered person, which may include a self-
certified reconciliation statement reconciling the value of
supplies declared in the returns furnished for the financial year
with the audited annual financial statements for that financial
year, to be furnished electronically.
7.6 Chapter X deals with the payment of tax. Section 49
prescribes the manner of accounting of tax, interest, penalty,
and other amounts paid. The taxes so credited are reflected in
the electronic cash ledger of the registered person, which also
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includes self-assessed input tax credit. The provision further
enables payment of output tax liability under the Act from the
amount available in the electronic credit ledger.
7.6.1 Section 49 also provides for the order of preference in
the utilization of the tax available in the electronic cash ledger.
Thereafter, it provides for refund in accordance with Section 54
of the Act.
7.6.2 Sub-section (8) of Section 49 mandates the discharge of
tax liability through self-assessed tax, either for the previous
period or the current period. Sub-section (9) further deals with
the presumption that the incidence of tax has been passed on
to the recipient of such goods or services or both, unless the
contrary is proved.
7.6.3 Section 50 provides for interest on delayed payment of
tax, Section 51 deals with Tax Deduction at Source and Section
54 provides for refund of tax.
7.7 Chapter XII deals with the assessment of tax payable
under the Act by every registered person. Section 59 mandates
self-assessment. Section 60 provides for provisional
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assessment, enabling a registered person to request the proper
officer to determine the rate of tax applicable. Upon such
request being made, the proper officer is required, in terms of
sub-section (3) of Section 60, to pass the final assessment
order within six months. Sub-section (4) of Section 60 imposes
a liability to pay interest on the tax payable pursuant to
provisional assessment. Thereafter, sub-section (5) provides for
refund in accordance with Section 54, subject to necessary
adjustments.
7.7.1 Similarly, Section 61 empowers the proper officer to
scrutinize the returns furnished by the registered person in
order to verify their correctness. If any discrepancies are
noticed, the same are required to be notified to the registered
person, who shall take appropriate action. If no action is taken
or if a satisfactory explanation is not furnished, the proper
officer may initiate appropriate proceedings, including those
under Section 73 or Section 74. A similar procedure is
prescribed for the assessment of non-filers of returns and
unregistered persons under Section 62.
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7.8 Section 73 empowers the proper officer to issue a show-
cause notice and determine the amount of tax, interest, and
penalty payable in cases relating to tax not paid, short paid,
erroneously refunded, or input tax credit wrongly availed or
utilized, for any reason other than fraud, wilful misstatement or
suppression of facts.
7.8.1 Proceedings under Section 73 may be initiated within a
period of three years from the due date for furnishing the
annual return for the financial year to which such default
relates or in which the erroneous refund is made. Sub-section
(2) mandates that the show-cause notice under sub-section (1)
shall be issued at least three months prior to the outer limit of
three years prescribed under sub-section (10).
7.9 Section 74 can be invoked in cases where the
determination of tax not paid or short paid, or erroneously
refunded, or input tax credit wrongly availed or utilized is by
reason of fraud, wilful misstatement, or suppression of facts.
Sub-section (2) mandates that the notice under sub-section (1)
shall be issued at least six months prior to the time limit
prescribed under sub-section (10) for the issuance of an order.
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Sub-section (10) prescribes a period of five years from the due
date for furnishing the annual return for the financial year
concerned for passing such order.
7.10 Sub-section (5) of Sections 73 and 74 provides that the
person chargeable with tax may pay the tax along with interest
and penalty, on the basis of his own ascertainment or as
ascertained by the proper officer. Sub-section (6) of Sections
73 and 74 mandates that the proper officer shall not serve any
notice under sub-section (1) in respect of the tax so paid or any
penalty payable under the provisions of the Act.
7.11 Sub-section (7) provides that where the amount paid
under sub-section (5) falls short of the amount actually
payable, the proper officer shall proceed to issue a notice under
sub-section (1) in respect of the amount which falls short of the
actual tax payable. Sub-section (8) provides that where the tax
along with interest is paid after issuance of the show-cause
notice under sub-section (1) and within the prescribed time, all
proceedings in respect of such notice shall be deemed to be
concluded. Sub-section (9) enables the proper officer to issue
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an order determining the amount of tax, interest, and penalty
payable.
8. The CGST Act, 2017 does not provide for any
reassessment in cases of non-payment or short payment of
tax, erroneous refund, or wrongful availment or utilisation of
input tax credit. The determination in such circumstances is
specifically provided for under Sections 73 and 74.
8.1 When a refund application is considered, the grant of
refund is not automatic. Section 54 is a code by itself, enabling
multifaceted consideration of a refund claim. In the process of
examining a refund application, if a situation contemplated
under Sections 73 or 74 is noticed, the proper officer cannot be
rendered remediless.
8.2 To enable the actions contemplated under Sections 73
and 74, the prescription of a period of two years assumes
significance. The period of two years carries considerable
importance and bears relevance to the periods of three years
and five years contemplated under Sections 73 and 74,
respectively. The only plausible reason that can be discerned
for prescribing the two-year limitation is that, if any situation
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contemplated under Sections 73 or 74 is noticed during the
consideration of a refund application, the authorities are
enabled to take appropriate remedial action, instead of allowing
the taxpayer to take undue advantage.
8.3 There are strong reasons for making the above
observation. If the hardship likely to be caused to the taxpayer
is to be considered on the ground that a refund claim cannot be
entertained after two years, and if directions are to be issued
permitting such claims beyond the said period, the
corresponding provisions, namely Sections 73 and 74 of the
Act, must also receive equal enablement.
8.4 In the absence of such corresponding enablement, a
situation may arise where a taxpayer or a registered person
claims refund after three years, possibly for bona fide reasons,
and during the consideration of such claim, the proper officer
notices circumstances contemplated under Section 73 or, as
the case may be, Section 74. In such an event, the proper
officer cannot be rendered handicapped or left without
recourse.
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8.5 Therefore, any relaxation of the limitation period of two
years prescribed under Section 54 must correspondingly enable
extension of time, if necessary, under Sections 73 and 74 of
the Act. In the absence of such corresponding enablement,
relaxing the limitation of two years under Section 54 would
render the statutory scheme meaningless.
E. Analysis:
Regarding Point No.(i):
9. The entire scheme of the CGST Act, 2017 is that of a
time-bound enactment. Every compliance by the registered
person/taxpayer as well as every action by the proper officer is
governed by prescribed timelines. The time limits form the
backbone of the Act, and such timelines are required to be
applied strictly. If the timelines are not viewed and enforced
strictly, the concept of finality in proceedings cannot be
sustained.
9.1 An equitable approach is required to be adopted on both
sides, namely, the registered person/taxpayer and the proper
officer. The Act provides for refund under Section 54, which
prescribes a period of two years from the relevant date. The
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expression "relevant date" is explained in the Explanation to
Section 54 with reference to different types of transactions. In
residuary cases, the relevant date is the date of payment of
tax.
9.2 In the above context, it is also necessary to read Section
77 along with Section 54. According to Section 77 of the Act,
where a registered person has paid Central tax and State tax
on a transaction considered by him to be an intra-State supply,
which is subsequently held to be an inter-State supply, such
person shall be entitled to refund of the taxes so paid, in such
manner and subject to such conditions as may be prescribed.
Similarly, where tax has been paid treating a transaction as an
inter-State supply, and it is subsequently held to be an intra-
State supply, the registered person shall not be required to pay
any interest on the amount of Central tax and State tax
payable on such supply.
9.3 A reading of Section 77 no doubt indicates that where tax
has been paid under IGST treating the transaction as "export of
services", and subsequently CGST and SGST are also paid
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treating the transaction as an intra-State supply, the registered
person would be entitled to a refund of the tax so wrongly paid.
9.4 In the present case, however, it is not necessary for this
Court to adjudicate regarding the entitlement to the refund.
The Revenue has made a categorical statement, and it is also
evident from the stand taken that the entitlement of the
assessee to the refund is not in dispute. The refund claim has
been denied not on the ground of entitlement, but solely on the
ground of limitation.
9.5 The proper officer, while administering the Act, is bound
by the provisions enacted therein in their strict sense. There is
no discretion vested in the proper officer to entertain a refund
claim filed after the expiry of two years, unless specific
exceptions are provided enabling such consideration. In the
absence of such enabling provisions, the period of two years
remains mandatory in so far as the proper officer is concerned.
9.6 Ordinarily, in taxing statutes, certain exceptions are
provided conferring jurisdiction on the authorities under the Act
to condone the timelines in specified situations or
circumstances. However, in response to a specific query of the
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Court, it has been submitted that no such enabling provision or
mechanism is provided under the Act to consider grievances in
cases where claims have not been made within the prescribed
time, particularly in respect of refund under Section 54 of the
Act.
9.7 In the absence of any enabling power either to condone
the delay or to treat the period of two years as directory, the
only possible interpretation of Section 54 is that the period
prescribed therein is mandatory. The mere presence of the
word "may", as contended, cannot always be construed as
directory; the expression must take its colour as either
directory or mandatory depending upon the context in which it
is used.
9.8 As analysed above, having regard to the purpose behind
prescribing the period of two years, we have no hesitation in
holding that the said period must be read as mandatory. If such
a construction is not adopted, it would confer unintended
discretion upon the proper officer and may also enable a
registered person/taxpayer to circumvent the provisions of
Sections 73 or 74 of the Act, as the case may be.
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9.9 It is a settled principle of law that a fiscal statute must be
interpreted on the basis of its plain language, assigning to it its
natural meaning. While interpreting such provisions, nothing
can be added or omitted by implication. This is the fundamental
principle governing the interpretation of fiscal statutes.
9.10 For the above reasons, we hold that Point No.(i) is to be
answered in the affirmative.
Regarding Point No.(ii)
10. While answering Point No. (i), it has been held that filing
an application under Section 54 within two years from the
relevant date is mandatory. Section 77 mandates the refund of
taxes paid in certain circumstances. However, the Act does not
provide any mechanism to redress grievances or difficulties that
may arise in the course of compliance with its provisions.
Unless expressly provided, the proper officer or any authority
under the Act cannot be conferred with such powers.
10.1 There may be instances where, due to genuine or
unavoidable reasons beyond the control of the taxpayer, the
period prescribed under Section 54 lapses. If no remedy is
made available in such circumstances, the provision may
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operate with undue harshness and arbitrariness. In the absence
of any such enabling provision under the Act, the jurisdiction of
this Court under Article 226 of the Constitution of India remains
the only available remedy. Merely because the provision under
Section 54 is held to be mandatory, it cannot be said that the
jurisdiction vested in this Court under Article 226 stands
excluded or rendered unavailable.
10.2 This Court may exercise its jurisdiction under Article 226
of the Constitution of India where the Act does not provide any
mechanism to remedy genuine hardship. There cannot be
universal guidelines or a straitjacket formula to deal with every
situation. The facts and circumstances of each case, as well as
the object and purpose of the provision, are required to be
considered by the Court while exercising jurisdiction under
Article 226. It is also a settled position of law that where the
statute does not provide a remedy, as in the present case
under the CGST Act, 2017, there is no bar for this Court to
invoke its jurisdiction under Article 226 of the Constitution.
10.3 If reference is made to a pari materia provision under the
Income-tax Act, 1961, the said enactment vests powers with
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the Central Board of Direct Taxes (CBDT) to mitigate
unintended hardship. Section 119 further enables the CBDT to
delegate such powers, subject to pecuniary jurisdiction, to
various Income-tax authorities under the Act. In the present
case, however, no such mechanism is provided under the CGST
Act, 2017, nor are any such powers vested in the proper officer
or any authority under the Act to address such situations.
10.4 The bar imposed under Section 54 operates only in
relation to the proper officer entertaining a refund claim after
the expiry of two years. The said bar cannot be construed as
being applicable to the Court while exercising its jurisdiction
under Article 226 of the Constitution of India.
10.5 We are therefore of the view that where an application for
refund is not filed within the time frame prescribed under
Section 54 of the Act, the person claiming refund may invoke
the writ jurisdiction of this Court under Article 226 of the
Constitution of India. We also declare that the writ jurisdiction
would be available for an additional reason, namely that no tax
can be levied or collected except by authority of law, as
mandated under Article 265 of the Constitution of India.
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10.6 The Hon'ble Supreme Court, in Dhulabhai and Others
v. State of Madhya Pradesh and Others
(MANU/SC/0157/1968), examined the exercise of
jurisdiction under Article 226 of the Constitution of India to
order refund where a complete mechanism is not provided
under the statute. It is held as under:
"13. This Court after examining the jurisdiction under Art.
226 concluded that the High Court had the power to order
refund in proceedings for a writ since complete relief
could not be said to be given if only a declaration were
given. The Court, however, observed :
"At the same time we cannot lose sight of the
fact that the special remedy provided in Article
226 is not intended to supersede completely the
modes of obtaining relief by an action in a civil
court or to deny defences legitimately open in
such actions."
14. Pointing out that where a defence of limitation could
be raised or other issues of fact had to be tried, it was
held that the Court should leave the party aggrieved to
seek his remedy by the ordinary mode of a civil suit.
Therefore in those cases (there were 31 appeals before
this Court) where the writ was asked for within three
years, this Court upheld the order of refund by the High
Court in its writ jurisdiction, but in those cases in which
the parties had gone to the High Court after a lapse of 3
years, the order of refund was questioned and not
approved observing that the petitioners would be at
liberty to seek such relief as they might be entitled to in a
Civil court if it was not barred by limitation.
15. It will appear from this analysis of the case that this
Court accepted the proposition that a suit lay. This it did
without adverting to the provisions of the Act there
considered to see whether the jurisdiction of the Civil
Courts was barred or not, either expressly or by
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necessary implication. This Court was, of course, not
invited to express its opinion on the matter but only on
whether the High Court in its extraordinary jurisdiction
could order refund of tax paid under a mistake. Having
held that in some cases the High Court should not order
refund, this Court merely pointed out that the civil suit
would be the only other remedy open to the party. The
case cannot, therefore, be treated as an authority to hold
that the Civil Courts had jurisdiction to entertain such
suits."
It is held that where no adequate remedy is provided
under the statute and no express bar is imposed, upon
examination of the scheme of the particular Act with regard to
the adequacy or sufficiency of the remedies, the exercise of
writ jurisdiction is permissible.
10.7 In the case on hand, Section 54 enables a claim for
refund but prescribes a limitation of two years. In cases of
payment of tax on two counts, where the statute contemplates
only one payment, Section 77 of the Act enables refund without
prescribing any limitation. When Section 77 does not impose
any time limit for claiming refund, rejection of such a refund
claim solely on the basis of Section 54 would indicate that the
scheme of the Act is not complete. In the light of the judgment
supra, where the statutory scheme does not provide an
adequate remedy, the exercise of writ jurisdiction under Article
226 of the Constitution of India would be permissible.
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10.8 In view of the peculiar facts involved in the present case,
the judgments cited at the Bar are of little assistance in
resolving the controversy in hand.
10.9 In Salonah Tea Co. Ltd. and Others v.
Superintendent of Taxes, Nowgong and Others, reported
in (1988) 1 SCC 401, the Hon'ble Supreme Court held as
under:
"14. ..... We agree that normally in a case where tax
or money has been realised without the authority of
law, the same should be refunded and in an
application under Article 226 of the Constitution the
court has power to direct the refund unless there has
been avoidable laches on the part of the petitioner
which indicate either the abandonment of his claims
or which is of such nature for which there is no
probable explanation or which will cause any injury
either to respondent or any third party. It is true
that in some cases the period of three years is
normally taken as a period beyond which the court
should not grant relief but that is not an inflexible
rule."
In view of the above, where the time limit prescribed for
making a refund claim under the Act has expired, the remedy
under Article 226 of the Constitution of India may be invoked,
however subject to and to the extent indicated while answering
Point No. (iii).
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Regarding Point No.(iii):
11. While analysing the provisions of the Act, we have
referred to the entire scheme of the enactment. It has been
held in the preceding paragraphs that the period of two years
prescribed under Section 54 carries both relevance and
purpose. While adopting a view to consider a belated refund
claim, the remedies otherwise available to the Revenue must
also be kept in view, as observed hereinabove.
11.1 If, while considering such a belated refund claim, a
situation contemplated under Section 73/74 arises, and the
refund claim is made after the time prescribed therein, the
proper officer would be disentitled from invoking Section 73/74,
even though he may be in possession of valid material. Had the
refund claim been filed within the prescribed period of two
years, the proper officer would undoubtedly have been entitled
to rely upon such material against the taxpayer.
11.2 When delay in claiming refund is condoned, the proper
officer must also be enabled to exercise or invoke such other
provisions as would have been available had the refund claim
been filed within time. If such an enabling principle is not
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recognised, it may result in entertaining unverifiable refund
claims and prevent the proper officer from initiating further
action under the Act. In the absence of such enablement in
favour of the proper officer, mere condonation of delay in filing
a refund claim may encourage belated claims, which may or
may not be genuine, while at the same time foreclosing action
otherwise permissible under the Act, including under Sections
73 and 74.
11.3 Adopting such an approach would strike a balance
between the interests of the taxpayer and the Revenue. It
would also ensure that only genuine refund claims invoke the
writ jurisdiction of this Court under Article 226 of the
Constitution of India. This view is taken having regard to the
broad object of the Act, namely, the levy and collection of tax
in accordance with law.
11.4 We hold that the taxpayer is entitled to seek condonation
of delay in claiming refund by invoking the jurisdiction of this
Court under Article 226 of the Constitution of India. The Court
may consider such request for condonation of delay on a case-
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to-case basis and, if found appropriate, direct the proper officer
to consider the refund claim in accordance with law.
11.5 While condoning the delay in filing the refund claim, the
Court must ensure that if any consequential action under
Sections 73 or 74 is required to be invoked and if the limitation
prescribed for such action has expired, appropriate extension of
time is granted to enable such action.
F. Summary:
12. In the light of the above reasoning and discussion, we
conclude as under:
(a) The period of two years prescribed under
Section 54 of the CGST Act, 2017 is
mandatory.
(b) As no remedy is provided under CGST Act to
consider a refund claim under Section 54, if filed
belatedly, it is open to any person claiming
refund to avail remedy under Article 226 of the
Constitution of India.
(c) The condonation of delay ordered by the
Court shall be subject to the condition that
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corresponding extension of time is granted in
favour of the proper officer to invoke other
applicable provisions, including Sections 73
and 74 of the Act, as may be necessary.
(d) If such other remedies were otherwise
available had the refund claim been filed
within two years under Section 54 of the Act,
the same shall continue to remain available.
(e) Once condonation of delay is granted by the
Court in filing the refund claim, the claim
shall be treated as having been filed within
the prescribed period of two years, thereby
enabling all consequential benefits to the
claimant as well as the exercise of
appropriate powers by the proper officer
under the Act.
(f) The scope of a writ petition under Article 226
would ordinarily be limited to the question of
condonation of delay, and would not
ordinarily extend to determination of the
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refund claim itself, unless the entitlement to
the refund is undisputed.
G. Conclusion
13. In the light of the above discussion, if the facts of the
present case are examined, it is evident that in the return filed
for October 2017, the assessee had paid IGST treating the
services as "export of services". Subsequently, the transaction
was treated as an intra-State supply, and the assessee paid
CGST and SGST. The refund claim was thereafter made in
respect of the IGST paid, under Section 54. The said refund
claim was rejected on the ground that it was filed beyond the
prescribed period of two years.
13.1 As discussed earlier, the refund claim is required to be
made in the form and manner prescribed. Such prescription has
been made under Rule 89(1A), which came into effect from
24.09.2021. Insofar as refund claims not made within the
period prescribed under Section 54, the proviso to sub-rule
(1A) of Rule 89 provided a one-time measure enabling such
claims to be made within two years from the date on which
sub-rule (1A) came into force.
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13.2 In the present case, the refund claim was made on
30.03.2024, which is even beyond the period provided in the
proviso. The delay is of six months. It is also not in dispute that
the entitlement to the refund, but for the technical ground of
limitation, is not questioned by the authorities.
13.3 In the light of the reasons assigned hereinabove, we are
of the view that the present case is a fit case for condonation of
delay. Accordingly, the delay in filing the application under
Section 54 of the Act is condoned. Consequently, the
application dated 30.03.2024 filed under Section 54 seeking
refund is directed to be considered in accordance with law.
14. In the light of the above, we pass the following:
ORDER
(i) Writ appeals are allowed-in-part.
(ii) The order of the learned Single Judge dated
SPONSORED
07.11.2025 in Writ Petition Nos.27259/2024,
27261/2024, 27552/2024, 27691/2024 and
28151/2024 are set aside to the extent
indicated above.
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(iii) In view of the condonation of delay in
filing the refund application, the appellant-
authorities are directed to consider the same
in accordance with law.
(iv) The time for compliance shall be sixty days
from the date of receipt of copy of this order.
Pending I.As., if any, stand disposed of.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(K. V. ARAVIND)
JUDGE
MV/DDU