Gujarat High Court Orders GST Refund of ₹40 Lakhs to Assessee Due to Voluntary Deposit Error, No Interest Granted (Case Name: Aalidhra Texcraft Engineers & ANR. vs. Union of India & ORS)

Aalidhra Texcraft Engineers v/s. Union of India

The Gujarat High Court has directed the refund of ₹40 lakh voluntarily deposited as GST by the petitioner, M/s Aalidhra Texcraft Engineers, ruling that the limitation under Section 54(1) of the GST Act, 2017, is inapplicable in this case. The petitioner, a manufacturer of textile machines, had imported goods during the financial year 2019-2020 and claimed input tax credit (ITC) on the integrated tax paid.

In November 2020, the company, perceiving a mismatch in ITC figures in its returns, voluntarily deposited ₹40 lakh through Form DRC-03, believing it had mistakenly claimed excess credit. However, a scrutiny by GST authorities in 2024 confirmed that no such excess credit liability existed for the financial year 2019-2020. Following this, the petitioner filed a refund application in March 2024, which was initially acknowledged but later rejected in June 2024 by the Assistant Commissioner of GST as time-barred under Section 54(1) of the Act.

The petitioner’s counsel argued that the ₹40 lakh deposited via Form DRC-03 was not paid as tax or interest under Section 54(1) of the Act, rendering the two-year limitation period irrelevant.

The High Court bench, comprising Justice Bhargav D. Karia and Justice D.N. Ray, reviewed judicial precedents and observed that the case did not fall within the scope of Section 54. Since the amount was voluntarily deposited due to a mistaken belief, it was not considered payment towards tax, interest, or penalty. Consequently, the bench directed the GST authorities to refund the amount but denied the petitioner any interest on it, as the deposit was made voluntarily. The bench further clarified that the timeline prescribed under Section 54(1) was inapplicable in such cases, emphasizing that the refund claim should not have been rejected on this basis. It was noted that “when the petitioner has deposited voluntarily the amount of Rs. 40,00,000/-, the same would not be covered by the provisions of Section 54 of the GST Act and the same is required to be refunded by the respondent authorities as the same could not have been rejected on the ground of limitation under Section 54(1) of the GST Act.”