M/S Bla Infrastructure Private LTD, Represented Through Its Director, Shri Sanjay Agarwal vs. The State Of Jharkhand

Held

The High Court held that the action of the respondents in rejecting the refund application on the grounds of it being time-barred has no legal basis. The Court found that the pre-deposit made by the assessee is a right vested upon them once the appeal is allowed in their favour. The Court reasoned that interpreting the word 'may' in Section 54(1) as mandatory ('shall') would be unreasonable, arbitrary, and in conflict with the Limitation Act, 1963, particularly Article 137 which provides a three-year limitation for money suits. The Court emphasized that retaining the pre-deposited amount on the ground of a statutory restriction that conflicts with the Limitation Act is a misreading by the authorities. The Court followed the interpretation of 'may' as discretionary, as per pronouncements of the Hon'ble Apex Court and the Madras High Court in Lenovo India Pvt. Ltd. The rejection order by way of Deficiency Memo dated 06.11.2024 was quashed and set aside. The Court directed the concerned respondent to process the refund application within six weeks and also pay statutory interest to the petitioner within the same period. No issue was expressly left undecided.

Facts

M/s. BLA Infrastructure Private Limited (Petitioner) filed a writ application challenging the rejection of its refund application for pre-deposited tax amount. The Petitioner had made a statutory pre-deposit of 10% of the disputed tax amount, totaling Rs. 1,13,454/-, to file an appeal against an ex-parte order passed under Section 74 of the JGST Act, 2017, which imposed a liability of Rs. 16,90,442/-. The appeal was allowed on 09.02.2022. The Petitioner applied for the refund of the pre-deposit on 11.09.2024. The Respondents, through a Deficiency Memo dated 06.11.2024, rejected the refund application on the grounds that it was time-barred under Section 54(1) of the Goods & Services Tax Act, as it was filed beyond two years from the relevant date.

Key Issues

1. Whether the application for refund of the pre-deposited amount, made after the appeal was allowed, is time-barred under Section 54(1) of the Goods & Services Tax Act, considering the 'relevant date' for the purpose of claiming refund of pre-deposited tax in an appeal that has been allowed? 2. Whether the word 'may' in Section 54(1) of the Goods & Services Tax Act, which states that a person claiming refund may make an application before the expiry of two years from the relevant date, should be interpreted as mandatory ('shall') or directory? Petitioner's Arguments: The Petitioner argued that the refund of pre-deposited amount is a vested right once the appeal is allowed. They contended that withholding the pre-deposit without reasonable cause is hit by Article 265 of the Constitution of India. They also relied on the interpretation of 'may' as discretionary and cited the Madras High Court's decision in Lenovo India Pvt. Ltd. and Apex Court decisions regarding the interpretation of 'may' in other statutes. Respondents' Arguments: The Respondents defended their action by referring to Section 54 of the Act and Circular No. 125/44/2019-GST, asserting that the application was time-barred and the jurisdictional officer has no authority to condone the delay.