Facts of the Case:

In this case, the petitioner challenged the rejection of refund passed in Form GST RFD-06 , pertaining to FY 2019-20. The refund claim related to excess/double payment of ₹6,01,645/- each under CGST and OGST , deposited through Form GST DRC-03 dated 18.09.2022 by utilizing the Cash Ledger.

Earlier, proceedings under Section 74 were initiated for FY 2019-20 on account of discrepancies relating to TDS credit and NIL liability in GSTR-3B. The petitioner had already discharged the differential tax liability on 08.02.2021 by utilizing the Credit Ledger through DRC-03 and later paid interest. The proceedings were ultimately dropped by order dated 08.11.2024. Subsequently, the petitioner realized that due to mistaken advice, the same tax amount had again been deposited on 18.09.2022 through the Cash Ledger for the very same transactions. Accordingly, refund application in Form GST RFD-01 was filed on 23.08.2025.

The Proper Officer rejected the refund on the ground that the application was filed beyond the two-year limitation prescribed under Section 54(1) read with Explanation (2)(h) (i.e. “relevant date” being the date of payment of tax).

Issue:

Whether refund of tax paid twice under a mistaken notion can be rejected solely on the ground of limitation under Section 54(1) of the GST Act, or whether such retention of excess tax violates Article 265 of the Constitution of India?

Held that:

The Court held that it was undisputed from the department’s own records that the petitioner had deposited the same tax amount twice once through Credit Ledger dated 08.02.2021 once through Credit Ledger dated 18.09.2022. Therefore, retention of one set of such payments by the State would offend Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. The Court relied upon precedents in Delhi Metro Rail Corporation Ltd. v. Additional Commissioner, CGST Appeals-II, Comsol Energy Private Limited v. State of Gujarat, wherein it was held that where tax is paid under mistake of law, such amount does not partake the character of “tax” legally due, and therefore Section 54 limitation would not apply. The claim falls within the ambit of Article 265 and general principles governing restitution of amounts paid under mistake.

The Court reinforces that where tax is paid twice due to mistake and no legal liability subsists, retention of such amount violates Article 265. In such cases, refund cannot be denied on the technical ground of limitation under Section 54 of the GST Act, as the payment itself lacks authority of law and falls within constitutional restitution principles.

Accordingly, the impugned rejection order was quashed.

Case Name: Rajendra Narayan Mohanty Versus Joint Commissioner of State Tax, CT & GST Circle, Cuttack, CT & GST Officer, Cuttack I East Circle. dated 12.02.2026