Section 74(10) Limitation in GST for Erroneous Refunds: Delhi High Court’s Approach in Vyome Therapeutics Limited
Background and Context
In Vyome Therapeutics Limited Vs Commissioner of CGST (East) Delhi & Ors. (W.P.(C) 9141/2026, decided on 12/08/2026), the Delhi High Court examined a challenge to an adjudication order dated 28.03.2026 passed under the CGST Act, 2017. The central issue raised was whether the adjudication order was within the limitation period prescribed under Section 74(10) of the CGST Act, 2017 where the demand related to an alleged erroneous refund.
The assessee invoked the writ jurisdiction of the High Court under Article 226 of the Constitution, contending that the order was time-barred. The Revenue opposed the writ petition, pointing out that (a) an appellate remedy was available and (b) the starting point for computing limitation under Section 74(10) was itself a contentious issue, unsuitable for adjudication under writ jurisdiction.
The High Court ultimately declined to entertain the writ petition and directed the assessee to pursue the statutory appeal, leaving the limitation controversy open.
Core Controversy: How to Compute Limitation Under Section 74(10)?
Section 74(10) of the CGST Act, 2017 prescribes a maximum time-limit of five years for passing orders in specified situations involving tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised by reason of fraud, wilful misstatement, or suppression of facts. Crucially, the provision contemplates different starting points for the five‑year period depending upon the nature of the demand.
In Vyome Therapeutics Limited’s case, the dispute centred on which “limb” of Section 74(10) governed the facts:
- Assessee’s position: the case involved an “erroneous refund”; therefore, the latter limb of
Section 74(10)applied, according to which limitation would run from the date of the erroneous refund. - Revenue’s position: the alleged erroneous refund surfaced during an audit under
Section 65, and the applicable limb was the first limb ofSection 74(10), where the five‑year period is computed from the due date for furnishing the annual return for the relevant financial year.
Because the starting point of limitation was disputed and required examination of the factual matrix, the Court considered this a debatable issue more appropriately addressed by the appellate forum.
Assessee’s Arguments Before the High Court
The assessee’s senior counsel did not dispute the existence of a statutory appellate remedy against the adjudication order dated 28.03.2026. However, the assessee attempted to bypass the appellate mechanism primarily on the following ground:
- The adjudication order was said to suffer from a jurisdictional infirmity as it had allegedly been passed beyond the prescribed limitation period under
Section 74(10). - According to the assessee, the case involved erroneous refund and, therefore, the latter limb of
Section 74(10)was squarely attracted. Under this interpretation, the five‑year limitation would start from the date on which the erroneous refund was actually granted. - On that basis, the assessee asserted that by the time the order dated 28.03.2026 was issued, the five‑year period calculated from the date of refund had already expired.
- The assessee thus requested the High Court to exercise writ jurisdiction and quash the order as being time-barred, contending that relegating the assessee to an appeal would be unnecessary when the order was ex facie beyond limitation.
In rejoinder, the assessee further asserted that the matter was not simply an outcome of audit proceedings but amounted to a case of adjudication independent of audit.