Gujarat High Court Restores Appeal Delayed by COVID-19, Orders Fresh Hearing on IGST Refund

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Case Name

M/s Supernova Engineers Limited Vs Union of India (High Court of Gujarat at Ahmedabad)

R/Special Civil Application No. 19196 of 2021

Date: 27th July 2022

Key Takeaways

• COVID-19 Limitation Extension Applies: The Supreme Court’s orders extending limitation periods during the pandemic apply to appeals under GST laws.
• Appeal Restored: The High Court set aside the order dismissing the appeal as time-barred and directed the appellate authority to hear the case on merits.
• No Decision on Merits Yet: The High Court did not decide whether the refund should be granted, only that the appeal should be heard.
• Legal Principle: Courts must consider the Supreme Court’s extension of limitation when dealing with delays caused by the pandemic, even in tax matters.

Issue

Was the delay in filing the appeal against the rejection of an IGST refund claim excusable due to the Supreme Court’s COVID-19 orders extending limitation periods, and should the appeal be heard on merits?

Facts

• Who: M/s Supernova Engineers Limited (the petitioner) is a manufacturer and supplier of Diesel Gensets (DG sets).
• What happened: They supplied DG sets to M/s Quartzkraft LLP, an SEZ unit, and paid IGST on the supply. Under Section 16 of the IGST Act, supplies to SEZs are zero-rated, so they claimed a refund of the IGST paid.
• Timeline:
• 28.01.2020: Goods supplied to SEZ with IGST paid.
• 30.10.2020: Refund application filed online.
• 11.11.2020: Show-cause notice issued, questioning the refund.
• 20.11.2020: Refund claim rejected.
• 21.04.2021: Appeal filed, but with a delay of 62 days beyond the condonable period.
• Why the delay: The delay was due to the COVID-19 pandemic and the resulting disruptions.
• What did the authorities do: The appellate authority dismissed the appeal as time-barred, not considering the Supreme Court’s orders extending limitation periods during the pandemic.

Arguments

Petitioner (Supernova Engineers Limited)

• The appeal was filed within the extended limitation period as per the Supreme Court’s orders in Suo Motu Writ Petition (Civil) No. 3 of 2020.
• Section 54 of the CGST Act allows refund for zero-rated supplies, and their supply to SEZ qualifies.
• The delay should be condoned due to the pandemic and the Supreme Court’s directions.

Respondent (Union of India)

• The appellate authority cannot condone a delay beyond one month after the prescribed three months, as per Section 107(4) of the CGST Act.
• The Supreme Court’s orders only apply to filing appeals, not to refund claims, as per a CBIC Circular dated 20th July 2021.
• Even on merits, the petitioner has no case.

Key Legal Precedents

• Suo Motu Writ Petition (Civil) No. 3 of 2020 (Supreme Court):
• The Supreme Court extended the period of limitation for all judicial and quasi-judicial proceedings due to the COVID-19 pandemic, with specific orders dated 23.03.2020, 08.03.2021, 27.04.2021, and 23.09.2021.
• The period from 15.03.2020 to 28.02.2022 is to be excluded when computing limitation periods for filing appeals, etc.
• Section 107(4) of the CGST Act, 2017:
• The appellate authority may condone delay up to one month beyond the prescribed three months for filing an appeal if sufficient cause is shown.

Judgement

• What the Court Did:
• The Gujarat High Court quashed the order dismissing the appeal as time-barred and remanded the matter to the appellate authority to decide the appeal on merits, treating it as filed within the limitation period.
• Reasoning:
• The Supreme Court’s orders extending limitation periods during the pandemic apply to this case. The period from 15.03.2020 to 28.02.2022 must be excluded when calculating the limitation period for filing the appeal. Therefore, the appeal was not time-barred.
• Next Steps:
• The appellate authority must now hear the appeal on merits and decide the refund claim within twelve weeks.
• No Decision on Refund:
• The High Court did not decide whether the refund should be granted—only that the appeal should be heard.

FAQs

Q1: Does this mean Supernova Engineers will get their refund?

Not necessarily. The High Court only said their appeal should be heard on merits. The appellate authority will now decide if the refund is justified.

Q2: Why was the appeal initially dismissed?

It was dismissed as time-barred because it was filed 62 days late, beyond the period the appellate authority could condone under Section 107(4) of the CGST Act.

Q3: What did the Supreme Court say about limitation periods during COVID-19?

The Supreme Court ordered that the period from 15.03.2020 to 28.02.2022 should be excluded when calculating limitation periods for all judicial and quasi-judicial proceedings, due to the pandemic.

Q4: Does this judgment mean all GST appeals delayed by COVID-19 will be accepted?

It sets a strong precedent that such delays should be excused if they fall within the Supreme Court’s extended limitation period, but each case will depend on its facts.

Q5: What happens next in this case?

The appellate authority will hear Supernova’s appeal on its merits and decide whether the refund should be granted, within twelve weeks.