COVID-19 limitation exclusion saves refund claim under Sec 77 for tax paid under wrong head

COVID-19 limitation exclusion saves refund claim under Sec 77 for tax paid under wrong head

Issue

Whether the refund applications filed under Section 77 (tax paid under wrong head) for the period January 2019 to March 2022 were barred by limitation, or if they were saved by the exclusion of the COVID-19 period under Notification No. 13/2022-Central Tax.

Facts

• Petitioner: Amidc Automation Technologies (P.) Ltd.

• Nature of Claim: Refund sought under Section 77 of the CGST Act read with Rule 89(1A) for tax mistakenly paid under the wrong head (e.g., IGST instead of CGST/SGST).

• Period Involved: January 2019 to March 2022.

• Filing Timeline:

  • First Application (09.05.2023): Covered Jan 2019 to Mar 2021. The Department issued a deficiency memo and did not adjudicate it on merits.

  • Second Application (28.02.2024): Covered Jan 2019 to Mar 2022.

• Rejection: The Adjudicating Authority rejected the claims as time-barred.

  • The Authority acknowledged Notification 13/2022, which excluded the period from March 2020 to February 2022 for limitation purposes.

  • However, despite computing the last date as 28.02.2024, the Authority erroneously rejected the application filed on that very day.

Decision

• Notification 13/2022 Applied: The Karnataka High Court confirmed that the period from 01.03.2020 to 28.02.2022 must be excluded when computing the limitation period for filing refund claims under Section 54.

• Timely Filing:

  • The first application dated 09.05.2023 was well within the limitation period (after adjusting for the COVID exclusion) for the period Jan 2019 – Mar 2021.

  • The subsequent application dated 28.02.2024 was filed exactly on the extended deadline computed by the Department itself.

• Error in Rejection: The Court held that the rejection was inconsistent with the statute and the record. The Authority failed to recognize that the exclusion period enured to the petitioner’s benefit.

• Ruling: The rejection order was set aside. The Court declared that all refund applications filed between 09.05.2023 and 03.02.2025 were within the prescribed limitation period and directed the Department to process them on merits.

Key Takeaways

COVID-19 Extension is Absolute: The exclusion of the period from March 2020 to February 2022 (Notification 13/2022) is a statutory right. Refund claims that would otherwise be time-barred are saved if they fall within the extended timeline.

Deficiency Memos: A deficiency memo allows a taxpayer to rectify defects. It cannot be used to indirectly time-bar a claim that was originally filed within the limitation period.

Wrong Head Refunds: For refunds under Section 77 (Rule 89(1A)), the limitation period is generally calculated from the date of payment of tax under the correct head, but general extensions like the COVID notification still apply to the overall timeline.