Time for a deficiency memo is excluded from refund limitation.
Issue
When a GST refund application is re-filed after a deficiency memo, should the time period between the original filing and the communication of the deficiency be excluded when calculating the two-year limitation period for the refund claim?
Facts
- The assessee, operating under the EPCG Scheme, claimed an IGST refund of ₹83.51 lakh on deemed exports.]
- After receiving deficiency memos in Form GST RFD-03, the assessee filed multiple rectified refund applications.]
- This led to a dispute over whether the final re-filed application was barred by the two-year limitation period.]
Decision
The Gujarat High Court ruled in favour of the assessee.
- It held that a re-filed refund application is a continuation of the original proceedings, not a new claim.]
- The court ruled that the period between the filing of the original refund claim and the date the deficiency is communicated must be excluded when computing the two-year limitation period.]
- Consequently, the court quashed the rejection order and restored the refund claim for a fresh decision on its merits.]
Key Takeways
- A Re-filed Application is Not a Fresh Claim: A rectified refund application submitted in response to a deficiency memo is considered a continuation of the original process.]
- The Limitation Clock Pauses: The time the department takes to review a refund application and issue a deficiency memo is excluded from the two-year limitation period for the re-filed application.]
- A Deficiency Memo Does Not Extinguish Rights: The issuance of a deficiency memo does not terminate the taxpayer’s right to a refund; it merely allows for correction and resubmission without being barred by limitation.]
- Substance Over Procedure: The court emphasized that procedural issues or repeated rectifications cannot be used to defeat a genuine refund claim that is filed within the permissible timeline once the deficiency-related time exclusions are properly considered.]