LI Network
Published on: 02 October, 2023 at 14:20 IST
In a recent ruling, the Delhi High Court Allowed Delhi Metro Rail Corporation (DMRC), granting them the right to claim a refund of Rs. 2,90,520, which had been mistakenly deposited as Goods and Services Tax (GST). The case arose from a situation where the GST authorities denied DMRC’s refund request, citing that it was submitted beyond the stipulated two-year period outlined in Section 54(1) of the Central Goods and Services Tax Act, 2017 (CGST Act).
The Division Bench of Justice Vibhu Bakhru and Justice Tara Vitasta Ganju made this decision while considering the matter. The court emphasized Article 265 of the Indian Constitution, which prohibits the levy or collection of tax without legal authority.
In this particular case, the court clarified that GST was not applicable to the services provided by DMRC in preparing a Detailed Project Report for the Surat Metro Rail Project.
The background of the case revolved around DMRC’s engagement by the Surat Municipal Corporation for the development of the Surat Metro Rail Project in Gujarat.
DMRC provided services for the preparation of a Detailed Project Report, invoicing a total of Rs. 19,04,520. This invoice included a GST component of Rs. 2,90,520, calculated at an 18% rate. While the Surat Municipal Corporation paid the invoice amount, they did not remit the GST component. DMRC, to comply with statutory provisions, deposited the GST amount with the authorities.
However, later, the Surat Municipal Corporation informed DMRC that the services provided were not subject to GST according to a specific notification issued by the Ministry of Finance. Consequently, DMRC applied for a refund of the GST amount deposited.
In their judgment, the Bench highlighted that Section 54 of the CGST Act is applicable only to refunds for taxes paid under the Act. Any amount collected by the Revenue without legal authority is not considered as tax collected, making Section 54 irrelevant in this context.
The court affirmed that DMRC was not liable to pay GST for the services related to the Detailed Project Report preparation. Therefore, the erroneously deposited amount of Rs. 2,90,520 could not be retained by the GST Department.
The Bench further clarified that the period of limitation for refund applications, as specified in Section 54 of the CGST Act, does not apply when GST is not chargeable, and when it is established that an amount has been deposited due to a mistake of law.
In light of these considerations, the Delhi High Court directed the GST Department to process DMRC’s refund claim promptly, ensuring justice prevails in this taxation matter.
Case Title: Delhi Metro Rail Corporation Ltd V. The Additional Commissioner, Central Goods and Services Tax Appeals II and Ors.
