Facts of the Case:

In this case, Revenue filed intra-court appeals before the Court challenging a common order that had allowed refund claims of the assessee despite delay. The respondent-assessee was engaged in providing intermediary services to foreign entities and earning commission income. For the tax period October 2017, the assessee treated its services as export of services and paid IGST. Later, in March 2018, it treated the same supplies as intra-State supplies and paid CGST and SGST. Thus, tax stood paid twice on the same transaction.

Subsequently, the assessee sought refund of the IGST paid by filing an application under Section 54 of the CGST Act on 30.03.2024. The refund was rejected by the department on the ground of limitation, holding that Section 54 prescribes a two-year limitation from the “relevant date”. Rule 89(1A), inserted on 24.09.2021, provided a special two-year window for past cases. The assessee’s application was filed even beyond this extended period.

The learned Single Judge set aside the rejection order, holding that the limitation under Section 54 and Rule 89(1A) was directory and that denial of refund on technical grounds was unjust when wrongful payment of tax was undisputed. The authorities were directed to process the refund. Aggrieved, the Revenue preferred intra-court appeals.

Issue:

Whether the two-year limitation prescribed under Section 54 of the CGST Act for filing refund applications is mandatory or directory. If mandatory, whether an assessee is left remediless in genuine cases of delayed refund claims. Whether delay in filing refund applications can be condoned, and if so, under what mechanism. 

Held that:

The Court held that the GST framework is a time-bound statutory scheme where both taxpayer compliance and departmental actions are governed by strict timelines. Section 54 prescribes a two-year limitation from the relevant date, and no discretion is vested in the proper officer to entertain belated claims. The limitation is closely linked to adjudicatory timelines under Sections 73 and 74. Relaxing refund timelines without extending departmental powers would disrupt the statutory balance. Fiscal statutes must be interpreted strictly; courts cannot dilute express limitation provisions. Accordingly, the Court held that the two-year limitation under Section 54 is mandatory.

The Court clarified that the CGST Act does not provide any statutory mechanism to condone delay in refund claims. In genuine cases, denial of refund solely on limitation may cause undue hardship, especially where tax was paid without authority of law. The bar under Section 54 applies to tax authorities, not to constitutional courts.

Therefore, an assessee can invoke writ jurisdiction under Article 226 before the High Court, particularly because no tax can be retained without authority of law (Article 265 of the Constitution). Where statutory remedies are inadequate, writ jurisdiction remains available. The Court relied on principles laid down by the Supreme Court permitting refund relief in writ proceedings where statutory mechanisms are incomplete.

Further, the Court stated that the delay in filing refund claims may be condoned by the High Court in writ jurisdiction on a case-to-case basis. However, condonation must also preserve the Revenue’s rights.

Accordingly, if delay is condoned, the proper officer must be granted corresponding extension to invoke proceedings under Sections 73/74, where necessary. Once condoned, the refund claim shall be treated as filed within limitation. Writ courts ordinarily should limit themselves to condonation of delay and not adjudicate refund merits unless entitlement is undisputed.

Case Name: Assistant Commissioner Of Central Taxes Bengaluru, Central Board Of Indirect Taxes And Customs, New Delhi Versus M/s Merck Life Science Private Limited. dated 17.03.2026