The High Court of Judicature at Andhra Pradesh in the case of Nspira Management Services Pvt. Ltd. v. Assistant/Deputy Commissioner of Central Tax, Writ Petition Number 18287 & 14905 of 2024, decided on 26.09.2025 under Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST”) held that the limitation period prescribed for refund claims is inapplicable where GST was wrongly collected on exempt residential rent.
The Court set aside the deficiency memos rejecting the Petitioner’s refund applications as time-barred and directed the tax authorities to decide the refund claims on merits, without reference to the limitation period.
FACTS
Nspira Management Services Pvt. Ltd. (hereinafter referred to as “the Petitioner”) is a company engaged in providing management and consultancy services to educational institutions and operating hostel facilities for students. To provide such accommodation, the Petitioner had taken residential dwellings on rent from private landlords who issued invoices including Goods and Services Tax (hereinafter referred to as “GST”), which the Petitioner paid in good faith.
The Assistant/Deputy Commissioner of Central Tax (hereinafter referred to as “the Respondent”) is the authority responsible for processing and adjudicating the refund claims under the CGST Act, 2017.
However, under Entry No. 12 of Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, renting of residential dwellings for use as residence is exempt from GST. Upon realizing that the GST paid on such rent had been wrongly collected, the Petitioner became entitled to claim a refund of the tax paid.
Accordingly, the Petitioner filed two refund applications before the GST department one dated 01 May 2024 for ₹11,49,32,214 covering July 2017 to January 2020, and another dated 29 February 2024 for February 2020 to June 2022. The department rejected both applications as time-barred, citing the two-year limitation period under Section 54(1) of the CGST Act, 2017.
Aggrieved, the Petitioner filed Writ Petition before the Hon’ble High Court of Andhra Pradesh.
ISSUES
- Whether the limitation period prescribed under Section 54 of the Central Goods and Services Tax Act, 2017 can restrict refund claims when the tax was collected without authority of law under Article 265 of the Constitution of India?
CONTENTIONS OF THE PARTIES
The Petitioner contended that the question of eligibility of refund cannot be decided by issuance of the defect memos as the same requires to be adjudicated in accordance with the procedure under the law. Herein, as per the procedure contemplated under Rule 92(3) of CGST Rules, 2017 failed to follow the due procedure by rejecting the refund through defective memos instead of issuing a show cause notice and a reasoned order.
The Petitioner further contended that the delay was not intentional but due to technical hurdles, and that denying refund would result in unjust enrichment by the State, contrary to Articles 14 and 19(1)(g) of the Constitution.
The Petitioner argued that renting of residential dwellings used as student hostels is exempted from GST under Entry No. 12 of Notification No. 12/2017 – CT (Rate), dated 28/06/2017. So, the GST paid to landlords was wrongly collected and without authority of law as violative of Article 265 of the Constitution of India.
It was also contended that the two-year limitation under Section 54 of the CGST Act, 2017 applies only to legally collected tax, not to amounts paid without authority of law. Therefore, the refund claims could not be rejected as time-barred.
The Respondent on the other hand contended that as per the Circular No. 125/44/2019-GST, dated 18/11/2019 issued by CBIC, once a deficiency memo has been issued, the refund application would not be further processed. Thus, the Petitioner’s claim was rejected, and no further adjudication was deemed necessary.
As per Section 54(1) of the CGST Act, 2017, any refund application must be filed within two years from the relevant date, and the Petitioner’s claims were beyond this limitation period.
The Respondent also contended that the Notification No. 13/2022–Central Tax, dated 05/07/2022, which excluded the period from 1 March 2020 to 28 February 2022 (COVID-19 period) from limitation computation. Even after applying this relaxation, the Petitioner’s refund claims should have been filed on or before 19 January 2024, but were actually submitted later.
Thus, justifying that the department’s action was lawful, that the refund claims were time-barred, and that the deficiency memos dated 21 May 2024 were validly issued in accordance with the statutory provisions and administrative circulars governing refund procedures.
FINDINGS AND DECISION
The Hon’ble High Court of Andhra Pradesh held that the limitation period under Section 54 of the CGST Act, 2017 does not apply to refund claims where GST was collected without authority of law. Referring to Entry No. 12 of Notification No. 12/2017 – Central Tax (Rate), dated 28/06/2017, the Court observed that renting of residential dwellings for residential use is exempt from GST, and therefore, the tax paid by the Petitioner was not legally leviable.
Placing reliance on the case of Comsol Energy Pvt. Ltd. v. State of Gujarat 2020(12) TAXREPLY 4336 the Court held that refund of tax wrongly collected must be decided on merits irrespective of time limits. No tax can be collected without legal authority, and hence, such collection cannot attract the limitation prescribed under Section 54.
The Court further found that the deficiency memos dated 21/05/2024, rejecting the Petitioner’s refund claims as time-barred, were illegal and unsustainable, as they were issued without following the prescribed procedure under Rule 92(3) of the CGST Rules, 2017, which requires issuance of a show cause notice, reply, and a reasoned order. The rejection of the refund claim through deficiency memos was, therefore, in violation of natural justice.
In the view of the above reasons and following the citied decisions, the Hon’ble Court set aside the impugned deficiency memos and directed the Respondent authorities to consider and decide the refund applications on merits, without reference to limitation, and to pass appropriate orders within four weeks from receipt of the judgment. The writ petitions were allowed in favour of the Petitioner, with no order as to costs.
AMLEGALS REMARKS
This case reinforces that no tax can be collected without authority of law as stated under Article 265 of the Constitution of India. The Court distinguishes the criteria between the tax legally due and tax wrongly collected by the government department.
It also clarifies that refund claims for such wrongly collections cannot be restricted by the limitation period under Section 54 of CGST Act, 2017. Overall, it ensures that procedural technicalities do not override substantive justice.
Furthermore, the judgment establishes an important precedent for taxpayers and departmental officers alike. It emphasizes that where taxes are collected in violation of an exemption notification or without jurisdiction, the principle of restitution under Article 265 and equity must prevail over procedural limitations. This interpretation promotes fairness in tax administration and strengthens judicial scrutiny over arbitrary application of limitation provisions in refund matters.
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