Patna HC Upholds Assessee’s Right to Refund under Section 77 CGST

Illustration depicting a legal theme with scales of justice, a gavel, and the Patna High Court building, accompanied by the title 'Patna HC Upholds Assessee’s Right to Refund.'

Case Summary: M/s Sai Steel v. The State of Bihar

Civil Writ Jurisdiction Case No.13163 of 2024

Bench: Justices Rajeev Ranjan Prasad and Shailendra Singh

Key Issue
Whether the limitation period for claiming refund under Section 77 of the CGST Act, 2017 read with Section 19 of the IGST Act should be computed from the date of original (wrong) payment of tax under CGST/SGST, or from the date when correct tax under IGST was deposited.

Legal Provisions Involved

Facts of the Case

  • The assessee filed all returns (GSTR-1, GSTR-3B, GSTR-9) and paid due taxes for FY 2017-18.
  • During audit under Section 65(6) (in Form GST ADT-02), it was noticed that certain transactions were inter-State but were wrongly treated as intra-State and tax paid under CGST/SGST.
  • The assessee later discharged IGST liability on those transactions.
  • Refund application for wrongly paid CGST/SGST was filed on 17.01.2024.
  • The Department rejected the refund citing Section 54 limitation – reckoning two years from January 2018 (original CGST/SGST payment date).

Arguments

  • Petitioner: Limitation should start from the date IGST was paid, not the original wrong payment.
  • Respondent/State: Refund time-barred as it was filed more than two years from January 2018.

Court’s Findings

  • The department erred in computing limitation from January 2018.
  • Correct position under Section 77 CGST + Section 19 IGST + Circular 162/18/2021:
    The relevant date is the date of payment of correct tax (IGST), not the earlier wrong payment under CGST/SGST.
  • Holding otherwise would render Section 77 and Section 19 nugatory.

Decision

  • Petition allowed.
  • Assessee entitled to refund of wrongly paid CGST and SGST.
  • Interest @ 6% p.a. from three months after the refund application date till actual refund.

Conclusion: The limitation for refund under Section 77 begins from the date of payment of the correct tax (IGST), not from the original incorrect payment (CGST/SGST).

Note: This decision reinforces the legislative intent of Section 77 CGST Act read with Section 19 IGST Act, supported by CBIC Circular No. 162/18/2021-GST.