High Court: Refund of GST Paid Twice Cannot Be Denied on Limitation; Article 265 Overrides Section 54

The petitioner, Rajendra Narayan Mohanty, was subject to a proceeding under Section 74 of the GST Act for the 2019-20 financial year after authorities noticed discrepancies in his returns. On February 8, 2021, the petitioner discharged the alleged tax liability of Rs. 12,03,290 using his Credit Ledger. However, acting on mistaken legal advice, he paid the exact same amount again on September 18, 2022, with Cash Ledger. After the underlying tax proceeding was dropped in November 2024, the petitioner sought a refund of the second payment.

The Revenue Department rejected the refund application on October 22, 2025, claiming it was filed beyond the two-year limitation period prescribed under Section 54 of the GST Act.

Issue Before Court: Whether the two-year limitation period under Section 54 of the GST Act applies to tax amounts deposited twice due to a mistake of law, and whether the Revenue can retain such payments under Article 265 of the Constitution.

HC Decided: The High Court set aside the rejection order and ruled in favor of the petitioner. The Court held that when a taxpayer deposits an amount under a “mistake of law,” such a payment does not take the color of “tax” legally due to the State. Thus, the strict two-year limitation period in Section 54 of the GST Act does not apply.

The Court applied Article 265 of the Constitution, which prohibits the collection of tax without the authority of law, and Section 17 of the Limitation Act, which allows for claims within three years from the discovery of a mistake. The Bench emphasized that the Revenue is not justified in retaining double payments for the same transaction and directed the Joint Commissioner to process a fresh refund application.

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