In a recent legal development, the Delhi Metro Rail Corporation (DMRC) has secured a significant victory in its pursuit of a GST refund. The case revolves around an erroneous tax payment of Rs.2,90,520 and subsequent refund denial. Here's a breakdown of the key points in this legal battle:
Petition Against Order-in-Appeal: DMRC filed a petition challenging Order-in-Appeal No. 241/2022-2023 issued by respondent no. 1 on 24.02.2023. This order rejected DMRC's appeal against an earlier order passed by respondent no. 2 on 04.07.2022.
Refund Claim Denied: DMRC sought a refund of Rs.2,90,520, erroneously deposited by them under the Central Goods and Services Tax Act, 2017 (CGST Act). The refund claim was denied on the grounds that it exceeded the two-year limitation period stipulated under Section 54(1) of the CGST Act.
Service Rendered to Surat Municipal Corporation: DMRC was contracted by Surat Municipal Corporation (respondent no. 3) to prepare a Detailed Project Report for the Surat Metro Rail Project in Gujarat. An invoice of Rs.19,04,520, including GST at 18%, was raised for services rendered on 11.08.2017.
Partial Payment and GST Issue: Respondent no. 3 paid Rs.16,14,000 against the invoice but did not pay the GST amount. In compliance with statutory provisions, DMRC deposited Rs.2,90,520 with GST Authorities for August 2017.
Notification on Non-taxable Services: DMRC was subsequently informed that the services billed under the invoice dated 11.08.2017 were not subject to GST, as per Notification no. 12/2017 - Central Tax (Rate) issued by the Ministry of Finance.
Refund Application Rejected: DMRC filed a refund application (Form GST RFD-01) on 02.05.2022, which was rejected on 04.07.2022 due to its filing beyond the two-year limit from the relevant date.
Constitutional Challenge: DMRC contended that retaining the erroneously paid amount would amount to tax collection without legal authority, violating Article 265 of the Constitution of India.
Precedent and Legal Support: DMRC relied on the Supreme Court's decision in "State of Madhya Pradesh & Anr. v. Bhailal Bhai: AIR 1964 SC 1006," emphasizing that payments made under a mistake of law must be refunded. DMRC also cited a similar case, "M/s Cosmol Energy Private Limited v. State of Gujarat: R/Special Civil Application No. 11905/2020," in which the Gujarat High Court ordered a refund of GST paid in error even beyond the two-year limit.
Clarification on Section 54: The Gujarat High Court's decision in "M/s Cosmol Energy Private Limited v. State of Gujarat" clarified that Section 54 of the CGST Act is not applicable when tax has been collected without legal authority.
No Departmental Appeal: Respondent's counsel confirmed that the department had not filed any appeal against the Gujarat High Court's decision in "M/s Cosmol Energy Private Limited v. State of Gujarat."
Constitutional Imperative: Article 265 of the Constitution prohibits tax collection without legal authority. Given that GST was not applicable to DMRC's services, the Rs.2,90,520 deposited under a mistaken belief should not be retained by the respondents.
Indirect Tax Burden: GST is an indirect tax, meaning the final recipient (respondent no. 3) bears the burden. Since GST was not applicable to the services, respondent no. 3 had not paid the tax amount.
Limitation Exception: The limitation period specified in Section 54 of the CGST Act does not apply when it is established that an amount has been deposited in error due to a mistake of law.
Legal Victory: In light of these arguments and the lack of departmental appeal against the precedent, the court set aside the impugned orders and directed the respondents to process DMRC's refund claim of Rs.2,90,520.
Petition Allowed: The court concluded by allowing DMRC's petition and securing a favorable outcome for the corporation in its quest for a GST refund.
Topic-Delhi Metro Rail Corporation Ltd. versus The Additional Commissioner, Central Goods and Services Tax Appeals II
Court-Delhi High Court
Date-18/09/2023
Team Taxonation
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