High Court Rules GST Refund Can’t Be Blocked by Technical Errors or Officer Delays

The petitioner, M/s. Merck Life Science Private Limited, supplied goods to SEZ units and paid IGST on zero-rated supplies. Refund claims filed under the IGST framework were rejected by the Assistant Commissioner on technical grounds, primarily for delay in obtaining SEZ endorsements within 45 days under Rule 30(4) of the SEZ Rules, alleged defects in endorsements, lack of proof of “authorized operations,” minor invoice mismatches, and limitation under Section 54 of the CGST Act.

Main Issue: Whether GST refund claims can be denied due to technical or procedural defects in SEZ endorsements and whether the limitation under Section 54 applies where tax was paid under a mistake of law.

HC’s Decision: The Karnataka High Court allowed the writ petitions, holding that substantive refund rights cannot be defeated by procedural technicalities. It ruled that delay in SEZ endorsements attributable to Authorized Officers cannot be used to deny refunds and that minor or clerical defects must be rectified, not treated as fatal.

The Court further held that the requirement of “authorized operations” under Section 16 of the IGST Act is prospective from 01.10.2023 and cannot apply to earlier periods. The Court set aside the rejection orders and remitted the matter for fresh consideration, directing that refunds should not be denied due to technical objections or administrative delays.

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