Merck Life Science Private Limited v. Assistant Commissioner of Central Taxes

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Assistant Commissioner Of Central ... vs M/S. Merck Life Science Private Limited on 17 March, 2026

Author: S.G.Pandit

Bench: S.G.Pandit

-1-
WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

               Reserved on   : 20.02.2026
               Pronounced on : 17.03.2026                                 R
                    IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                       DATED THIS THE 17TH DAY OF MARCH, 2026

                                       PRESENT

                         THE HON'BLE MR. JUSTICE S.G.PANDIT
                                         AND
                        THE HON'BLE MR. JUSTICE K. V. ARAVIND

                         WRIT APPEAL No. 110 OF 2026 (T-RES)
                                         C/W
                         WRIT APPEAL No. 119 OF 2026 (T-RES)
                         WRIT APPEAL No. 122 OF 2026 (T-RES)
                         WRIT APPEAL No. 126 OF 2026 (T-RES)
                         WRIT APPEAL No. 140 OF 2026 (T-RES)

               IN WA No. 110/2026

               BETWEEN:

Digitally signed
by VINUTHA B
S 1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
Location: High
Court of NORTH WEST DIVISION-1,
Karnataka NORTH WEST COMMISSIONERATE,
2ND FLOOR, BMTC COMPLEX,
SHIVAJINAGAR BUS STAND,
BENGALURU - 560 051.

               2.    CENTRAL BOARD OF INDIRECT TAXES AND
                     CUSTOMS,
                     REPRESENTED HEREIN BY
                     THE CHAIRMAN
                     DEPARTMENT OF REVENUE,
                     MINISTRY OF FINANCE,
                        -2-
                                 WA No. 110 of 2026
                             C/W WA No. 119 of 2026
                                 WA No. 122 of 2026
                                     AND 2 OTHERS

 GOVERNMENT OF INDIA, NORTH BLOCK,
 NEW DELHI - 110 001.

1. THE UNION OF INDIA
   REPRESENTED HEREIN BY
   THE SECRETARY
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE
   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.
   ...APPELLANTS
   (BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)
   AND:

2. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
   REPRESENTED BY ITS AUTHORISED SIGNATORY
   MS. SNEHA PATIL,
   AGED ABOUT 35 YEARS,
   DAUGHTER OF PANDURANG PATIL,
   HAVING OFFICE AT GODREJ ONE,
   8TH FLOOR, PRIOJSHA NAGAR,
   EASTERN EXPRESS HIGHWAY,
   VIKHROLI (EAST) MUMBAI - 400 079.
   ...RESPONDENT
   (BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)

   THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA
   HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED
   BY THE LEARNED SINGLE JUDGE IN WP No.27259/2024 (T-
   RES) DATED 07.11.2025.

IN WA No.119/2026

BETWEEN:

1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
   NORTH WEST DIVISION-1,
   NORTH WEST COMMISSIONERATE,
   -3-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

   2ND FLOOR, BMTC COMPLEX,
   SHIVAJINAGAR BUS STAND,
   BENGALURU - 560 051.

2. CENTRAL BOARD OF INDIRECT TAXES
   AND CUSTOMS
   REPRESENTED HEREIN BY
   THE CHAIRMAN
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE,
   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.

3. THE UNION OF INDIA
   REPRESENTED HEREIN BY
   THE SECRETARY
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE
   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.
   ...APPELLANTS
   (BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)

AND:

1. M/S. MERCK LIFE SCIENCE PRIVATE LIMITED
   REPRESENTED BY ITS
   AUTHORISED SIGNATORY
   MS. SNEHA PATIL,
   AGED ABOUT 35 YEARS,
   DAUGHTER OF PANDURANG PATIL,
   HAVING OFFICE AT GODREJ ONE,
   8TH FLOOR, PRIOJSHA NAGAR,
   EASTERN EXPRESS HIGHWAY,
   VIKHROLI (EAST), MUMBAI - 400 079.
   ...RESPONDENT
   (BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)

   THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
   KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
   -4-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
27691/2024 (T-RES) DATED 07.11.2025.

IN WA No. 122/2026

BETWEEN:

1. ASSISTANT COMMISSIONER OF CENTRAL TAXES
   NORTH WEST DIVISION-1,
   NORTH WEST COMMISSIONERATE,
   2ND FLOOR, BMTC COMPLEX,
   SHIVAJINAGAR BUS STAND,
   BENGALURU - 560 051.

2. CENTRAL BOARD OF INDIRECT TAXES
   AND CUSTOMS
   REPRESENTED HEREIN BY
   THE CHAIRMAN
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE,
   GOVERNMENT OF INDIA,
   NORTH BLOCK,
   NEW DELHI - 110 001.

3. THE UNION OF INDIA
   REPRESENTED HEREIN BY
   THE SECRETARY
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE,
   GOVERNMENT OF INDIA,
   NORTH BLOCK,
   NEW DELHI - 110 001.
   ...APPELLANTS
   (BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)

AND:

1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
   REPRESENTED BY ITS
   AUTHORISED SIGNATORY
   MS. SNEHA PATIL,
   -5-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

   AGED ABOUT 35 YEARS,
   DAUGHTER OF PANDURANG PATIL,
   HAVING OFFICE AT GODREJ ONE,
   8TH FLOOR, PRIOJSHA NAGAR,
   EASTERN EXPRESS HIGHWAY,
   VIKHROLI (EAST),
   MUMBAI - 400 079.
   ...RESPONDENT
   (BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)

   THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
   KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
   ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
   28151/2024 (T-RES) DATED 07.11.2025.

IN WA No. 126/2026

BETWEEN:

1. ASSISTANT COMMISSIONER OF CENTRAL TAXES,
   NORTH WEST DIVISION-1,
   NORTH WEST COMMISSIONERATE,
   2ND FLOOR, BMTC COMPLEX,
   SHIVAJINAGAR BUS STAND,
   BENGALURU - 560 051.

2. CENTRAL BOARD OF INDIRECT TAXES
   AND CUSTOMS
   REPRESENTED HEREIN BY
   THE CHAIRMAN
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE,
   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.

3. THE UNION OF INDIA
   REPRESENTED HEREIN BY
   THE SECRETARY
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE
   -6-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.
   ...APPELLANTS
   (BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)

AND:

1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
   REPRESENTED BY ITS
   AUTHORISED SIGNATORY
   MS. SNEHA PATIL,
   AGED ABOUT 35 YEARS,
   DAUGHTER OF PANDURANG PATIL,
   HAVING OFFICE AT GODREJ ONE,
   8TH FLOOR, PRIOJSHA NAGAR,
   EASTERN EXPRESS HIGHWAY,
   VIKHROLI (EAST) MUMBAI - 400 079.
   ...RESPONDENT
   (BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)

   THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
   KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
   ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
   27691/2024 (T-RES) DATED 07.11.2025.

IN WA No. 140/2026

BETWEEN:

1. ASSISTANT COMMISSIONER OF
   CENTRAL TAXES
   NORTH WEST DIVISION-1,
   NORTH WEST COMMISSIONERATE,
   2ND FLOOR, BMTC COMPLEX,
   SHIVAJINAGAR BUS STAND,
   BENGALURU - 560 051.

2. CENTRAL BOARD OF INDIRECT TAXES
   AND CUSTOMS
   REPRESENTED HEREIN BY
   -7-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

   THE CHAIRMAN
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE,
   GOVERNMENT OF INDIA, NORTH BLOCK,
   NEW DELHI - 110 001.

3. THE UNION OF INDIA
   REPRESENTED HEREIN BY THE SECRETARY
   DEPARTMENT OF REVENUE,
   MINISTRY OF FINANCE
   GOVERNMENT OF INDIA,
   NORTH BLOCK,
   NEW DELHI - 110 001.
   ...APPELLANTS
   (BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUNSEL)

AND:

1. M/S MERCK LIFE SCIENCE PRIVATE LIMITED
   REPRESENTED BY ITS
   AUTHORISED SIGNATORY
   MS. SNEHA PATIL,
   AGED ABOUT 35 YEARS,
   DAUGHTER OF PANDURANG PATIL,
   HAVING OFFICE AT GODREJ ONE,
   8TH FLOOR, PRIOJSHA NAGAR,
   EASTERN EXPRESS HIGHWAY,
   VIKHROLI (EAST)
   MUMBAI - 400 079.
   ...RESPONDENT
   (BY SRI BHARATH B. RAICHANDANI, ADVOCATE FOR C/R1)

   THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
   KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
   ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP
   No.27261/2024 DATED 07.11.2025 AND PASS SUCH OTHER
   SUITABLE ORDERS.

   THESE APPEALS HAVING BEEN HEARD AND RESERVED
   FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS
   DAY, K.V. ARAVIND J., DELIVERED THE FOLLOWING:-
   -8-
   WA No. 110 of 2026
   C/W WA No. 119 of 2026
   WA No. 122 of 2026
   AND 2 OTHERS

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND

                          C.A.V. ORDER

          (PER HON'BLE Mr. JUSTICE K. V. ARAVIND)

  Heard Sri Aravind V. Chavan, learned Senior Standing

Counsel for the appellants-Revenue and Sri Bharath B.

Raichandani, learned counsel for the respondent-Assessee.

1. The Revenue has preferred these intra-Court appeals

under Section 4 of the Karnataka High Court Act, 1961,

impugning the order dated 07.11.2025 passed by the learned

Single Judge in W.P. No.27259/2024 (T-RES) and four other

petitions.

  All the appeals raise common questions. Learned counsel

appearing on both sides addressed common submissions.

Hence, the appeals are disposed by common judgment.

  For convenience, the facts in Writ Appeal No.110/2026

are referred.

A. Facts in brief:

1. The respondent-assessee is a company engaged in the

business of healthcare, life sciences, and electronics, providing
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WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

intermediary services to foreign entities and earning

commission income therefrom. The assessee filed its return in

Form GSTR-3B for the tax period October 2017 and paid

Integrated Goods and Services Tax (IGST). Subsequently, the

assessee filed another return in Form GSTR-3B in March 2018

and paid Central Goods and Services Tax (CGST) and State

Goods and Services Tax (SGST).

3.1 In the return filed earlier, the services were treated as

"export of services", and IGST was paid. However, in the return

filed in March 2018, the assessee paid CGST and SGST,

treating the transaction as intra-State supplies. It is stated that

the erroneous payment of IGST was not refunded. Notification

No.35/2021-Central Tax dated 24.09.2021 inserted Rule

89(1A) of the Central Goods and Services Tax Rules, 2017 (for

short, "CGST Rules"), prescribing the procedure and timelines

for claiming refund.

3.2 It is further stated that circulars were issued by the GST

authorities to give effect to Rule 89(1A). The application filed

by the assessee under Section 54 of the Central Goods and

Services Tax Act, 2017 (for short, " CGST Act ") came to be
- 10 -
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

rejected on the ground that it was filed beyond the prescribed

period. It was held that although Rule 89(1A) came into effect

from 24.09.2021, a period of two years was provided to claim

refund in respect of cases that had arisen prior to the Rules

coming into force. The application for refund filed by the

assessee is dated 30.03.2024. Accordingly, by order dated

27.05.2024 at Annexure-B, the claim for refund was rejected.

Aggrieved by the order rejecting the refund, the assessee

preferred a writ petition.

3.3 In the impugned order, the learned Single Judge allowed

the writ petition. The learned Single Judge, while setting aside

the order rejecting the refund, held that Section 54 of the CGST

Act and Rule 89(1A) of the CGST Rules are directory in nature

and not mandatory. The learned Single Judge further held that

the wrongful payment of IGST is not disputed by the

authorities, and therefore, the rejection of the refund claim due

to it being filed belatedly is incorrect. While holding so, the

learned Single Judge declared that the refund application is not

belated and directed the authorities to pass appropriate orders

on the refund application within the prescribed time frame.
- 11 -
WA No. 110 of 2026
C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

B. Submissions:

(i). On behalf of Revenue;

1. Sri Aravind V. Chavan, learned Senior Standing Counsel

for the appellants-Revenue, submits that Section 54 enables a

claim for refund of any tax. The provision prescribes a period of

two years from the relevant date, within which such claim is

required to be made in the prescribed form and manner. It is

further submitted that the period of two years prescribed under Section 54 is mandatory. According to the learned counsel,

declaring the time limit under Section 54 as directory, as held

by the learned Single Judge, would amount to re-writing the

statutory provision, which is impermissible in law.

4.1 The learned Senior Standing Counsel further submits that

sub-rule (1A) of Rule 89 came into effect from 24.09.2021.

Since the prescribed Form was not available till that date, the

proviso to sub-rule (1A) of Rule 89 provided a period of two

years from the date on which the sub-rule came into force for

claiming refund. It is submitted that the refund claim was not

made either within the period prescribed under Section 54 or

within the time stipulated under Rule 89(1A). The assessee,

having failed to claim the refund within the prescribed time,
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

cannot now seek the benefit of refund, which would otherwise

amount to unjust enrichment.

4.2 It is further submitted that when a specific procedure and

timelines are prescribed for claiming refund, the same must

necessarily be complied with within the stipulated period.

According to the learned counsel, the time limit prescribed has

relevance to other adjudicatory procedures under the Act. If

the period of limitation prescribed under Section 54 is

construed as directory and not mandatory, and consequently

no limitation is enforced, the other adjudicatory proceedings

under the Act, which are intended to be time-bound, would be

rendered nugatory.

4.3 It is further submitted that the learned Single Judge has

not considered the object of prescribing the timeline under Section 54, and that the said provision is mandatory in nature.

It is contended that the authorities, being bound by the

provisions of the Act and the Rules, have acted strictly in

accordance with the plain language of the statute, and

therefore cannot be said to have committed any error in law.
- 13 -
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

4.4 With the above submissions, the learned Senior Standing

Counsel contends that the order passed by the learned Single

Judge is unsustainable in law. It is submitted that the order

rejecting the refund claim is justified. Accordingly, he prays

that the writ appeal be allowed.

(ii). On behalf of Assessee;

1. Sri Bharath B. Raichandani, learned counsel for the

respondent-assessee, submits that the assessee had initially

treated the services rendered as "export of services" and

accordingly paid IGST to the Central Government.

Subsequently, upon realizing that the transaction constituted

an intra-State supply, the assessee paid SGST. In view of the

payment of both IGST and SGST, the assessee filed an

application for refund under Section 54 of the Act on

30.03.2024.

5.1 It is submitted that Section 54 of the Act enables an

assessee to claim refund by making an application before the

expiry of two years from the relevant date, in such manner as

may be prescribed. It is further submitted that the rules

governing refund were notified only later by inserting sub-rule
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

(1A) to Rule 89, which came into effect from 24.09.2021. It is

contended that though the GST in question was paid during

several months in the year 2017, the mechanism for claiming

refund was provided only from 24.09.2021. Therefore,

according to the learned counsel, the plain reading of [Section

54](https://indiankanoon.org/doc/57003380/) of the Act indicates that filing an application within two

years from the relevant date is directory in nature and not

mandatory.

5.2 The learned counsel further submits that when tax is paid

without authority of law, the timeline prescribed under [Section

54](https://indiankanoon.org/doc/57003380/) of the Act is not applicable. It is contended that the Revenue

can retain taxes only in accordance with law, as mandated

under Article 265 of the Constitution of India. It is further

submitted that if the refund is denied on technical grounds, the

same would result in unjust enrichment in the hands of the

Revenue.

5.3. The learned counsel further submits that, having regard

to the facts of the present case, the taxes were paid twice,

once as IGST and again as CGST & SGST. Therefore, the

incorrect payment of IGST is liable to be refunded without
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

raising any plea based on technicalities. It is submitted that the

refund application dated 30.03.2024 was filed within a

reasonable time, and the learned Single Judge was justified in

directing the authorities to process the refund application by

holding that an application under Section 54 is not governed by

any limitation. Accordingly, he prays that the appeal be

dismissed.

C. Points for Consideration:

1. Having considered the submissions made by the learned

counsel for the parties and upon perusal of the appeal papers,

the following points arise for consideration by this Court:

  (i)      Whether filing of an application within the time

           provided under [Section 54](https://indiankanoon.org/doc/57003380/) of the CGST Act is

           mandatory?

  (ii)     If Point No.(i) is answered in the affirmative, is the

           Assessee/registered person left with no remedy to

           claim genuine refunds?

  (iii)    What is the mechanism to condone the delay in

           filing the refund application under [Section 54](https://indiankanoon.org/doc/57003380/) of

           CGST Act.
                            - 16 -
                                        WA No. 110 of 2026
                                    C/W WA No. 119 of 2026
                                        WA No. 122 of 2026
                                            AND 2 OTHERS

D. Scheme of GST Act:

1. Before proceeding to answer the above points, it is

necessary to analyze the scheme of the Act.

7.1 Chapter III of the Act deals with the levy and collection of

tax. This Chapter provides for the scope of supply, liability, levy

and collection of tax, and the power to grant exemption from

the levy of tax.

7.2 Chapter V deals with Input Tax Credit in respect of taxes

paid on the supply of goods or services used in the course or

furtherance of business.

7.3 Chapter VII deals with Tax Invoice, Credit and Debit

Notes. Section 31 mandates that a registered person supplying

taxable goods shall, before or at the time of removal of the

goods for supply to the recipient, or at the time of delivery of

goods or making them available to the recipient, issue a tax

invoice showing the description, quantity and value of goods,

the tax charged thereon, and such other prescribed particulars.

7.4 Chapter VIII deals with Accounts and Records, requiring a

registered person to maintain true and correct accounts of
- 17 -
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C/W WA No. 119 of 2026
WA No. 122 of 2026
AND 2 OTHERS

production or manufacture of goods, inward and outward

supply of goods or services, stock of goods, input tax credit

availed, output tax payable or paid, and such other particulars

as may be prescribed. Section 36 requires a registered person

to keep and maintain books of account and other records until

the expiry of seventy-two months from the due date of

furnishing the annual return for the year to which such

accounts and records pertain.

7.5 Chapter IX deals with the furnishing of returns, including

details of outward supplies, inward supplies, and availment of

input tax credit. Section 44 provides for the filing of an annual

return by a registered person, which may include a self-

certified reconciliation statement reconciling the value of

supplies declared in the returns furnished for the financial year

with the audited annual financial statements for that financial

year, to be furnished electronically.

7.6 Chapter X deals with the payment of tax. Section 49 prescribes the manner of accounting of tax, interest, penalty,

and other amounts paid. The taxes so credited are reflected in

the electronic cash ledger of the registered person, which also
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AND 2 OTHERS

includes self-assessed input tax credit. The provision further

enables payment of output tax liability under the Act from the

amount available in the electronic credit ledger.

7.6.1 Section 49 also provides for the order of preference in

the utilization of the tax available in the electronic cash ledger.

Thereafter, it provides for refund in accordance with Section 54 of the Act.

7.6.2 Sub-section (8) of Section 49 mandates the discharge of

tax liability through self-assessed tax, either for the previous

period or the current period. Sub-section (9) further deals with

the presumption that the incidence of tax has been passed on

to the recipient of such goods or services or both, unless the

contrary is proved.

7.6.3 Section 50 provides for interest on delayed payment of

tax, Section 51 deals with Tax Deduction at Source and [Section

54](https://indiankanoon.org/doc/57003380/) provides for refund of tax.

7.7 Chapter XII deals with the assessment of tax payable

under the Act by every registered person. Section 59 mandates

self-assessment. Section 60 provides for provisional
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AND 2 OTHERS

assessment, enabling a registered person to request the proper

officer to determine the rate of tax applicable. Upon such

request being made, the proper officer is required, in terms of

sub-section (3) of Section 60, to pass the final assessment

order within six months. Sub-section (4) of Section 60 imposes

a liability to pay interest on the tax payable pursuant to

provisional assessment. Thereafter, sub-section (5) provides for

refund in accordance with Section 54, subject to necessary

adjustments.

7.7.1 Similarly, Section 61 empowers the proper officer to

scrutinize the returns furnished by the registered person in

order to verify their correctness. If any discrepancies are

noticed, the same are required to be notified to the registered

person, who shall take appropriate action. If no action is taken

or if a satisfactory explanation is not furnished, the proper

officer may initiate appropriate proceedings, including those

under Section 73 or Section 74. A similar procedure is

prescribed for the assessment of non-filers of returns and

unregistered persons under Section 62.
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C/W WA No. 119 of 2026
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AND 2 OTHERS

7.8 Section 73 empowers the proper officer to issue a show-

cause notice and determine the amount of tax, interest, and

penalty payable in cases relating to tax not paid, short paid,

erroneously refunded, or input tax credit wrongly availed or

utilized, for any reason other than fraud, wilful misstatement or

suppression of facts.

7.8.1 Proceedings under Section 73 may be initiated within a

period of three years from the due date for furnishing the

annual return for the financial year to which such default

relates or in which the erroneous refund is made. Sub-section

(2) mandates that the show-cause notice under sub-section (1)

shall be issued at least three months prior to the outer limit of

three years prescribed under sub-section (10).

7.9 Section 74 can be invoked in cases where the

determination of tax not paid or short paid, or erroneously

refunded, or input tax credit wrongly availed or utilized is by

reason of fraud, wilful misstatement, or suppression of facts.

Sub-section (2) mandates that the notice under sub-section (1)

shall be issued at least six months prior to the time limit

prescribed under sub-section (10) for the issuance of an order.
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AND 2 OTHERS

Sub-section (10) prescribes a period of five years from the due

date for furnishing the annual return for the financial year

concerned for passing such order.

7.10 Sub-section (5) of Sections 73 and 74 provides that the

person chargeable with tax may pay the tax along with interest

and penalty, on the basis of his own ascertainment or as

ascertained by the proper officer. Sub-section (6) of [Sections

73](https://indiankanoon.org/doc/107027098/) and 74 mandates that the proper officer shall not serve any

notice under sub-section (1) in respect of the tax so paid or any

penalty payable under the provisions of the Act.

7.11 Sub-section (7) provides that where the amount paid

under sub-section (5) falls short of the amount actually

payable, the proper officer shall proceed to issue a notice under

sub-section (1) in respect of the amount which falls short of the

actual tax payable. Sub-section (8) provides that where the tax

along with interest is paid after issuance of the show-cause

notice under sub-section (1) and within the prescribed time, all

proceedings in respect of such notice shall be deemed to be

concluded. Sub-section (9) enables the proper officer to issue
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an order determining the amount of tax, interest, and penalty

payable.

1. The CGST Act, 2017 does not provide for any

reassessment in cases of non-payment or short payment of

tax, erroneous refund, or wrongful availment or utilisation of

input tax credit. The determination in such circumstances is

specifically provided for under Sections 73 and 74.

8.1 When a refund application is considered, the grant of

refund is not automatic. Section 54 is a code by itself, enabling

multifaceted consideration of a refund claim. In the process of

examining a refund application, if a situation contemplated

under Sections 73 or 74 is noticed, the proper officer cannot be

rendered remediless.

8.2 To enable the actions contemplated under Sections 73 and 74, the prescription of a period of two years assumes

significance. The period of two years carries considerable

importance and bears relevance to the periods of three years

and five years contemplated under Sections 73 and 74,

respectively. The only plausible reason that can be discerned

for prescribing the two-year limitation is that, if any situation
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contemplated under Sections 73 or 74 is noticed during the

consideration of a refund application, the authorities are

enabled to take appropriate remedial action, instead of allowing

the taxpayer to take undue advantage.

8.3 There are strong reasons for making the above

observation. If the hardship likely to be caused to the taxpayer

is to be considered on the ground that a refund claim cannot be

entertained after two years, and if directions are to be issued

permitting such claims beyond the said period, the

corresponding provisions, namely Sections 73 and 74 of the

Act, must also receive equal enablement.

8.4 In the absence of such corresponding enablement, a

situation may arise where a taxpayer or a registered person

claims refund after three years, possibly for bona fide reasons,

and during the consideration of such claim, the proper officer

notices circumstances contemplated under Section 73 or, as

the case may be, Section 74. In such an event, the proper

officer cannot be rendered handicapped or left without

recourse.
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8.5 Therefore, any relaxation of the limitation period of two

years prescribed under Section 54 must correspondingly enable

extension of time, if necessary, under Sections 73 and 74 of

the Act. In the absence of such corresponding enablement,

relaxing the limitation of two years under Section 54 would

render the statutory scheme meaningless.

E. Analysis:

Regarding Point No.(i):

1. The entire scheme of the CGST Act, 2017 is that of a

time-bound enactment. Every compliance by the registered

person/taxpayer as well as every action by the proper officer is

governed by prescribed timelines. The time limits form the

backbone of the Act, and such timelines are required to be

applied strictly. If the timelines are not viewed and enforced

strictly, the concept of finality in proceedings cannot be

sustained.

9.1 An equitable approach is required to be adopted on both

sides, namely, the registered person/taxpayer and the proper

officer. The Act provides for refund under Section 54, which

prescribes a period of two years from the relevant date. The
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expression "relevant date" is explained in the Explanation to Section 54 with reference to different types of transactions. In

residuary cases, the relevant date is the date of payment of

tax.

9.2 In the above context, it is also necessary to read [Section

77](https://indiankanoon.org/doc/17442896/) along with Section 54. According to Section 77 of the Act,

where a registered person has paid Central tax and State tax

on a transaction considered by him to be an intra-State supply,

which is subsequently held to be an inter-State supply, such

person shall be entitled to refund of the taxes so paid, in such

manner and subject to such conditions as may be prescribed.

Similarly, where tax has been paid treating a transaction as an

inter-State supply, and it is subsequently held to be an intra-

State supply, the registered person shall not be required to pay

any interest on the amount of Central tax and State tax

payable on such supply.

9.3 A reading of Section 77 no doubt indicates that where tax

has been paid under IGST treating the transaction as "export of

services", and subsequently CGST and SGST are also paid
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treating the transaction as an intra-State supply, the registered

person would be entitled to a refund of the tax so wrongly paid.

9.4 In the present case, however, it is not necessary for this

Court to adjudicate regarding the entitlement to the refund.

The Revenue has made a categorical statement, and it is also

evident from the stand taken that the entitlement of the

assessee to the refund is not in dispute. The refund claim has

been denied not on the ground of entitlement, but solely on the

ground of limitation.

9.5 The proper officer, while administering the Act, is bound

by the provisions enacted therein in their strict sense. There is

no discretion vested in the proper officer to entertain a refund

claim filed after the expiry of two years, unless specific

exceptions are provided enabling such consideration. In the

absence of such enabling provisions, the period of two years

remains mandatory in so far as the proper officer is concerned.

9.6 Ordinarily, in taxing statutes, certain exceptions are

provided conferring jurisdiction on the authorities under the Act

to condone the timelines in specified situations or

circumstances. However, in response to a specific query of the
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Court, it has been submitted that no such enabling provision or

mechanism is provided under the Act to consider grievances in

cases where claims have not been made within the prescribed

time, particularly in respect of refund under Section 54 of the

Act.

9.7 In the absence of any enabling power either to condone

the delay or to treat the period of two years as directory, the

only possible interpretation of Section 54 is that the period

prescribed therein is mandatory. The mere presence of the

word "may", as contended, cannot always be construed as

directory; the expression must take its colour as either

directory or mandatory depending upon the context in which it

is used.

9.8 As analysed above, having regard to the purpose behind

prescribing the period of two years, we have no hesitation in

holding that the said period must be read as mandatory. If such

a construction is not adopted, it would confer unintended

discretion upon the proper officer and may also enable a

registered person/taxpayer to circumvent the provisions of Sections 73 or 74 of the Act, as the case may be.
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9.9 It is a settled principle of law that a fiscal statute must be

interpreted on the basis of its plain language, assigning to it its

natural meaning. While interpreting such provisions, nothing

can be added or omitted by implication. This is the fundamental

principle governing the interpretation of fiscal statutes.

9.10 For the above reasons, we hold that Point No.(i) is to be

answered in the affirmative.

Regarding Point No.(ii)

1. While answering Point No. (i), it has been held that filing

an application under Section 54 within two years from the

relevant date is mandatory. Section 77 mandates the refund of

taxes paid in certain circumstances. However, the Act does not

provide any mechanism to redress grievances or difficulties that

may arise in the course of compliance with its provisions.

Unless expressly provided, the proper officer or any authority

under the Act cannot be conferred with such powers.

10.1 There may be instances where, due to genuine or

unavoidable reasons beyond the control of the taxpayer, the

period prescribed under Section 54 lapses. If no remedy is

made available in such circumstances, the provision may
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operate with undue harshness and arbitrariness. In the absence

of any such enabling provision under the Act, the jurisdiction of

this Court under Article 226 of the Constitution of India remains

the only available remedy. Merely because the provision under Section 54 is held to be mandatory, it cannot be said that the

jurisdiction vested in this Court under Article 226 stands

excluded or rendered unavailable.

10.2 This Court may exercise its jurisdiction under Article 226 of the Constitution of India where the Act does not provide any

mechanism to remedy genuine hardship. There cannot be

universal guidelines or a straitjacket formula to deal with every

situation. The facts and circumstances of each case, as well as

the object and purpose of the provision, are required to be

considered by the Court while exercising jurisdiction under Article 226. It is also a settled position of law that where the

statute does not provide a remedy, as in the present case

under the CGST Act, 2017, there is no bar for this Court to

invoke its jurisdiction under Article 226 of the Constitution.

10.3 If reference is made to a pari materia provision under the Income-tax Act, 1961, the said enactment vests powers with
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the Central Board of Direct Taxes (CBDT) to mitigate

unintended hardship. Section 119 further enables the CBDT to

delegate such powers, subject to pecuniary jurisdiction, to

various Income-tax authorities under the Act. In the present

case, however, no such mechanism is provided under the [CGST

Act, 2017](https://indiankanoon.org/doc/95399496/), nor are any such powers vested in the proper officer

or any authority under the Act to address such situations.

10.4 The bar imposed under Section 54 operates only in

relation to the proper officer entertaining a refund claim after

the expiry of two years. The said bar cannot be construed as

being applicable to the Court while exercising its jurisdiction

under Article 226 of the Constitution of India.

10.5 We are therefore of the view that where an application for

refund is not filed within the time frame prescribed under Section 54 of the Act, the person claiming refund may invoke

the writ jurisdiction of this Court under Article 226 of the

Constitution of India. We also declare that the writ jurisdiction

would be available for an additional reason, namely that no tax

can be levied or collected except by authority of law, as

mandated under Article 265 of the Constitution of India.
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10.6 The Hon'ble Supreme Court, in Dhulabhai and Others

v. State of Madhya Pradesh and Others

(MANU/SC/0157/1968), examined the exercise of

jurisdiction under Article 226 of the Constitution of India to

order refund where a complete mechanism is not provided

under the statute. It is held as under:

  "13. This Court after examining the jurisdiction under [Art.
  226](https://indiankanoon.org/doc/1712542/) concluded that the High Court had the power to order
  refund in proceedings for a writ since complete relief
  could not be said to be given if only a declaration were
  given. The Court, however, observed :

        "At the same time we cannot lose sight of the
        fact that the special remedy provided in [Article
        226](https://indiankanoon.org/doc/1712542/) is not intended to supersede completely the
        modes of obtaining relief by an action in a civil
        court or to deny defences legitimately open in
        such actions."

  14. Pointing out that where a defence of limitation could
  be raised or other issues of fact had to be tried, it was
  held that the Court should leave the party aggrieved to
  seek his remedy by the ordinary mode of a civil suit.
  Therefore in those cases (there were 31 appeals before
  this Court) where the writ was asked for within three
  years, this Court upheld the order of refund by the High
  Court in its writ jurisdiction, but in those cases in which
  the parties had gone to the High Court after a lapse of 3
  years, the order of refund was questioned and not
  approved observing that the petitioners would be at
  liberty to seek such relief as they might be entitled to in a
  Civil court if it was not barred by limitation.

  15. It will appear from this analysis of the case that this
  Court accepted the proposition that a suit lay. This it did
  without adverting to the provisions of the Act there
  considered to see whether the jurisdiction of the Civil
  Courts was barred or not, either expressly or by
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  necessary implication. This Court was, of course, not
  invited to express its opinion on the matter but only on
  whether the High Court in its extraordinary jurisdiction
  could order refund of tax paid under a mistake. Having
  held that in some cases the High Court should not order
  refund, this Court merely pointed out that the civil suit
  would be the only other remedy open to the party. The
  case cannot, therefore, be treated as an authority to hold
  that the Civil Courts had jurisdiction to entertain such
  suits."

  It is held that where no adequate remedy is provided

under the statute and no express bar is imposed, upon

examination of the scheme of the particular Act with regard to

the adequacy or sufficiency of the remedies, the exercise of

writ jurisdiction is permissible.

10.7 In the case on hand, Section 54 enables a claim for

refund but prescribes a limitation of two years. In cases of

payment of tax on two counts, where the statute contemplates

only one payment, Section 77 of the Act enables refund without

prescribing any limitation. When Section 77 does not impose

any time limit for claiming refund, rejection of such a refund

claim solely on the basis of Section 54 would indicate that the

scheme of the Act is not complete. In the light of the judgment

supra, where the statutory scheme does not provide an

adequate remedy, the exercise of writ jurisdiction under [Article

226](https://indiankanoon.org/doc/1712542/) of the Constitution of India would be permissible.
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10.8 In view of the peculiar facts involved in the present case,

the judgments cited at the Bar are of little assistance in

resolving the controversy in hand.

10.9 In Salonah Tea Co. Ltd. and Others v.

Superintendent of Taxes, Nowgong and Others, reported

in (1988) 1 SCC 401, the Hon'ble Supreme Court held as

under:

      "14. ..... We agree that normally in a case where tax
      or money has been realised without the authority of
      law, the same should be refunded and in an
      application under [Article 226](https://indiankanoon.org/doc/1712542/) of the Constitution the
      court has power to direct the refund unless there has
      been avoidable laches on the part of the petitioner
      which indicate either the abandonment of his claims
      or which is of such nature for which there is no
      probable explanation or which will cause any injury
      either to respondent or any third party. It is true
      that in some cases the period of three years is
      normally taken as a period beyond which the court
      should not grant relief but that is not an inflexible
      rule."

  In view of the above, where the time limit prescribed for

making a refund claim under the Act has expired, the remedy

under Article 226 of the Constitution of India may be invoked,

however subject to and to the extent indicated while answering

Point No. (iii).
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Regarding Point No.(iii):

1. While analysing the provisions of the Act, we have

referred to the entire scheme of the enactment. It has been

held in the preceding paragraphs that the period of two years

prescribed under Section 54 carries both relevance and

purpose. While adopting a view to consider a belated refund

claim, the remedies otherwise available to the Revenue must

also be kept in view, as observed hereinabove.

11.1 If, while considering such a belated refund claim, a

situation contemplated under Section 73 / 74 arises, and the

refund claim is made after the time prescribed therein, the

proper officer would be disentitled from invoking Section 73 / 74,

even though he may be in possession of valid material. Had the

refund claim been filed within the prescribed period of two

years, the proper officer would undoubtedly have been entitled

to rely upon such material against the taxpayer.

11.2 When delay in claiming refund is condoned, the proper

officer must also be enabled to exercise or invoke such other

provisions as would have been available had the refund claim

been filed within time. If such an enabling principle is not
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recognised, it may result in entertaining unverifiable refund

claims and prevent the proper officer from initiating further

action under the Act. In the absence of such enablement in

favour of the proper officer, mere condonation of delay in filing

a refund claim may encourage belated claims, which may or

may not be genuine, while at the same time foreclosing action

otherwise permissible under the Act, including under [Sections

73](https://indiankanoon.org/doc/107027098/) and 74.

11.3 Adopting such an approach would strike a balance

between the interests of the taxpayer and the Revenue. It

would also ensure that only genuine refund claims invoke the

writ jurisdiction of this Court under Article 226 of the

Constitution of India. This view is taken having regard to the

broad object of the Act, namely, the levy and collection of tax

in accordance with law.

11.4 We hold that the taxpayer is entitled to seek condonation

of delay in claiming refund by invoking the jurisdiction of this

Court under Article 226 of the Constitution of India. The Court

may consider such request for condonation of delay on a case-
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to-case basis and, if found appropriate, direct the proper officer

to consider the refund claim in accordance with law.

11.5 While condoning the delay in filing the refund claim, the

Court must ensure that if any consequential action under Sections 73 or 74 is required to be invoked and if the limitation

prescribed for such action has expired, appropriate extension of

time is granted to enable such action.

F. Summary:

1. In the light of the above reasoning and discussion, we

conclude as under:

  (a)   The period of two years prescribed under [Section   54](https://indiankanoon.org/doc/57003380/) of   the      CGST   Act,   2017   is

        mandatory.

  (b)   As no remedy is provided under [CGST Act](https://indiankanoon.org/doc/95399496/) to

        consider a refund claim under [Section 54](https://indiankanoon.org/doc/57003380/), if filed

        belatedly, it is open to any person claiming

        refund to avail remedy under [Article 226](https://indiankanoon.org/doc/1712542/) of the

        Constitution of India.

  (c)   The condonation of delay ordered by the

        Court shall be subject to the condition that
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  corresponding extension of time is granted in

  favour of the proper officer to invoke other

  applicable provisions, including [Sections 73](https://indiankanoon.org/doc/107027098/) and [74](https://indiankanoon.org/doc/21142678/) of the Act, as may be necessary.

(d) If such other remedies were otherwise

  available had the refund claim been filed

  within two years under [Section 54](https://indiankanoon.org/doc/57003380/) of the Act,

  the same shall continue to remain available.

(e) Once condonation of delay is granted by the

  Court in filing the refund claim, the claim

  shall be treated as having been filed within

  the prescribed period of two years, thereby

  enabling all consequential benefits to the

  claimant    as      well       as   the    exercise    of

  appropriate powers by the proper officer

  under the Act.

(f) The scope of a writ petition under Article 226 would ordinarily be limited to the question of

  condonation      of    delay,        and     would    not

  ordinarily extend to determination of the
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       refund claim itself, unless the entitlement to

       the refund is undisputed.

G. Conclusion

1. In the light of the above discussion, if the facts of the

present case are examined, it is evident that in the return filed

for October 2017, the assessee had paid IGST treating the

services as "export of services". Subsequently, the transaction

was treated as an intra-State supply, and the assessee paid

CGST and SGST. The refund claim was thereafter made in

respect of the IGST paid, under Section 54. The said refund

claim was rejected on the ground that it was filed beyond the

prescribed period of two years.

13.1 As discussed earlier, the refund claim is required to be

made in the form and manner prescribed. Such prescription has

been made under Rule 89(1A), which came into effect from

24.09.2021. Insofar as refund claims not made within the

period prescribed under Section 54, the proviso to sub-rule

(1A) of Rule 89 provided a one-time measure enabling such

claims to be made within two years from the date on which

sub-rule (1A) came into force.
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13.2 In the present case, the refund claim was made on

30.03.2024, which is even beyond the period provided in the

proviso. The delay is of six months. It is also not in dispute that

the entitlement to the refund, but for the technical ground of

limitation, is not questioned by the authorities.

13.3 In the light of the reasons assigned hereinabove, we are

of the view that the present case is a fit case for condonation of

delay. Accordingly, the delay in filing the application under Section 54 of the Act is condoned. Consequently, the

application dated 30.03.2024 filed under Section 54 seeking

refund is directed to be considered in accordance with law.

1. In the light of the above, we pass the following:

                        ORDER (i)     Writ appeals are allowed-in-part.
   

(ii) The order of the learned Single Judge dated

          07.11.2025 in Writ Petition Nos.27259/2024,

          27261/2024, 27552/2024, 27691/2024 and

          28151/2024 are set aside to the extent

          indicated above.

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(iii) In view of the condonation of delay in

       filing the refund application, the appellant-

       authorities are directed to consider the same

       in accordance with law.

(iv) The time for compliance shall be sixty days

       from the date of receipt of copy of this order.

Pending I.As., if any, stand disposed of.

Sd/-

(S.G.PANDIT)
JUDGE

                                     Sd/-

(K. V. ARAVIND)
JUDGE

MV/DDU