The provisions of indirect tax laws have time and again provided for timelines in respect of various aspects ranging from filing of returns, initiation of department proceedings, filing of refund applications, filing of appeals, etc. Under the erstwhile regime, Section 11-B of the Central Excise Act, 1944 provided that a person seeking refund may make an application for refund before the expiry of one year from the relevant date.

Under the GST Regime, Section 54 of the Central Goods and Services Act, 2017 (CGST Act) contains similar language, stating that a person claiming refund may make an application before the expiry of two years from the relevant date. Upon a plain reading of the provision, it appears to be clear that there is a time-limit of 2 years specifically prescribed for different situations and such time-limit is to be considered as mandatorily applicable. This position had also been unambiguous and clear during the erstwhile regime as held in the decisions of the Supreme Court1, and as a general practice during the present regime.

Assessees had therefore ensured the filing of refund applications within such prescribed time limit of 2 years from the relevant date as applicable. The Department had also been interpreting such timeline to be strict, due to which various refund applications filed by assessees were rejected on account of being filed beyond the prescribed time-limit.

While the position regarding time-limit for applying for refund seemed settled, the Madras High Court (HC) recently provided a different interpretation of the time-limit specified in Section 54 of the CGST Act.

In Lenovo (India) (P) Ltd. v. Commr. of GST (Appeals-I)2, writ petitions were filed against certain order-in-appeals wherein applications filed seeking refund of IGST paid on supply of goods to special economic zone units were rejected. One of the grounds for rejection was that certain supporting documentation was not submitted at the time of filing applications but was furnished at the time of filing reply/personal hearing, and the same was barred by limitation. The Madras High Court specifically referred to the language used in Section 54(1) of the CGST Act which specifies that an assessee “may” make application before 2 years from the relevant date, thereby stating that the wordings of the provision meant it was not mandatory to make a refund application within 2 years and, the time-limit under Section 54(1) of the CGST Act was directory in nature, not mandatory. It was further held that in “appropriate cases”, applications may be made even beyond two years and in such cases, the legitimate refund claims of the assessee could not be denied.

This proposition was reiterated in ARS Energy (P) Ltd. v. Commr. (Appeals)3 wherein petitioners had discharged IGST on ocean freight charges and sought refund of the same, in light of a judgment of the Supreme Court4. In this case, the refund application was rejected on merits and also on the grounds that it was filed beyond the limitation period as prescribed under Section 54 of the CGST Act. When a writ petition was filed against the refund rejection order, the Madras High Court relied on the judgment in Lenovo case5 to reiterate that the limitation period under Section 54(1) of the CGST Act was directory in nature and not mandatory.

Based on the interpretation of Section 54(1) of the CGST Act in the aforementioned judgments, a relief seemed to have been bestowed upon assessees across various industries, both for those with ongoing proceedings where refund applications may have been rejected on the grounds of limitation, as well as in respect of future refund applications. Although there seemed to be no ambiguity regarding the interpretation of the time-limit in Section 54(1) of the CGST Act, the interpretation adopted by the Madras High Court in the aforementioned cases were beneficial for assessees and therefore, was nevertheless a welcome interpretation.

However, attention may also be drawn to the judgment of the Delhi High Court in Sethi Sons (India) v. Commr. 6 wherein a writ petition was filed against an order-in-original rejecting the claim of refund of unutilised input tax credit accumulated on account of export without payment of IGST under bond/LUT While referring to the findings in Lenovo case7, the Delhi High Court categorically mentioned that they respectfully have reservations regarding the view in the aforementioned case.

While the Delhi High Court did not expressly provide its views regarding the interpretation of Section 54(1) of the CGST Act, it can be said that there seems to be an implied divergence from the interpretation adopted by the Madras High Court. Consequently, while it seems that the Madras High Court granted relief to assessees, there arises doubt regarding whether such benefit can be availed by the assessees primarily due to the fact that no express view has been provided by the Delhi High Court, thereby leading to an ambiguity regarding the interpretation of the provision.

A question also arises as to whether the benefit arising out of the interpretation would be applicable only in the State of Tamil Nadu since the favourable judgments were rendered by the High Court in Tamil Nadu.

Additionally, while adopting a beneficial interpretation of Section 54 of the CGST Act, the Madras High Court specified that refund applications may be filed beyond two years in “appropriate case”, without specifying the situations which would fall within the ambit of “appropriate case”. This leads to a doubt regarding whether such benefit is applicable in all cases or only in appropriate circumstances and if the latter, what would suffice to constitute an “appropriate case”.

Lastly, considering that such beneficial interpretation has been provided almost 6 years after the introduction of GST, there arises uncertainty regarding the applicability of this interpretation, that is, whether such benefit can be used by assessees only for ongoing refund proceedings at any stage of litigation for applications filed beyond 2 years or for future periods allowing assessees to file applications beyond the period of 2 years or even to reopen past cases where refund applications were rejected solely on the grounds of limitation.

While the Madras High Court did pronounce a landmark judgment by conferring such a benefit to assessees, a new-found ambiguity has now arisen regarding the interpretation of the time-limit imposed under Section 54 of the CGST Act, as the same had been strictly interpreted as mandatory since the inception of GST, both by assessees and the Department. Such ambiguity has been exacerbated by the reservation of the Delhi High Court, making the once seemingly settled position regarding time-limit under Section 54 of the CGST Act, now unsettled.

Such ambiguity may cause a hindrance to assessees in availing benefit of the interpretation of the Madras High Court, although the same has been expressly provided by not just one, but two judgments of the Madras High Court.

It is therefore essential for the Government to clarify the correct interpretation of the provision and strengthen the same, whether in favour of the assessee or otherwise. This may be done by an amendment to the provision itself. Alternatively, considering that diverging views have been adopted by two High Courts of different jurisdictions, it is to be seen if such case might travel the course of litigation to reach the Supreme Court and thereafter gain clarity by way of a judgment of the Supreme Court that would be binding and applicable uniformly across all jurisdictions.

†Associate Partner.

††Associate Partner.


1. Mafatlal Industries v. Union of India, (1997) 5 SCC 536; Union of India v. Uttam Steel Ltd., (2015) 13 SCC 209 and Sansera Engg. Ltd. v. Commr., 2022 SCC OnLine SC 1635

2. W.P.No.23604 of 2022

3. W.P.No.17763 of 2020

4. Union of India v. Mohit Minerals (P) Ltd., (2022) 10 SCC 700.

5. W.P.No.23604 of 2022

6. 2023 SCC OnLine Del 8351.

7. W.P.No.23604 of 2022

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