The Andhra Pradesh High Court has ruled in favor of M/s NSPira Management Services Pvt. Ltd., allowing the refund of tax wrongly paid on exempt residential dwelling services. The case involved the company, which provides educational management and hostel services, paying GST on rent invoices from landlords, despite such services being exempt under a specific notification. The company filed for refunds for the periods from July 2017 to January 2020 and February 2020 to June 2022. However, the refund applications were initially rejected by the tax department for being filed beyond the two-year limitation period stipulated in Section 54 of the CGST Act.
The court addressed the issue of whether the refund of tax collected without legal authority could be denied based on limitation grounds. It concluded that such tax does not fall under the scope of Section 54 of the CGST Act. Instead, it is governed by Section 17 of the Limitation Act, as Article 265 of the Constitution prohibits tax collection without legal sanction. The court cited precedents, emphasizing that the limitation period under Section 54 does not apply to refunds of tax paid by mistake of law.
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Consequently, the court quashed the deficiency memos issued by the tax authorities and directed them to process the refund applications without considering the limitation period. The authorities are required to pass appropriate orders within four weeks, ensuring that the refund claims are handled in accordance with the legal principles established in this ruling.
Order date: 26 Sept 2025
Parties: M/s NSPira Management Services Pvt. Ltd. v. Assistant/Deputy Commissioner of Central Tax, Nellore & Ors.
Facts –
- The petitioner, a company engaged in educational management and hostel services, rented residential dwellings from landlords to provide student accommodation.
- The landlords charged GST on rent invoices, which the petitioner paid, even though such services are exempt under Entry No.12 of Notification No.12/2017-Central Tax (Rate), dated 28.06.2017.
- The petitioner filed refund applications on 01.05.2024 and 29.02.2024 for the tax wrongly paid for the periods July 2017–Jan 2020 and Feb 2020–June 2022 respectively.
- The department initially issued defect memos seeking further details but later rejected the refund as “not fit for processing” on the ground that it was filed beyond the two-year limitation under Section 54 of the CGST Act.
Issue –
- Whether refund of tax wrongly collected without authority of law can be denied on the ground of limitation under Section 54 of the CGST Act, 2017?
Order –
- The Court held that tax collected without authority of law falls outside the scope of Section 54 and cannot be treated as “tax” under the Act. Instead, such cases are governed by Section 17 of the Limitation Act, and Article 265 of the Constitution prohibits collection of tax without legal sanction.
- Citing Comsol Energy Pvt. Ltd. v. State of Gujarat and Binani Cement Ltd. v. Union of India, the Court reiterated that limitation under Section 54 does not apply to refund of tax paid under mistake of law.
- Authorities cannot reject refund claims merely because they were filed beyond the prescribed period when the tax itself was not payable.
- The deficiency memos were quashed, and respondents were directed to process the refund applications without examining limitation and pass appropriate orders within 4 weeks.
