Refund of GST Paid Under Mistake: Limitation Under Section 54 Not a Bar, Holds Orissa High Court

The Orissa High Court in Rajendra Narayan Mohanty Vs Joint Commissioner of State Tax (Orissa High Court) has delivered a significant ruling on refund of GST paid twice for the same liability. The Court has clarified that where tax has been deposited erroneously or under a mistaken understanding, the assessee’s claim for refund cannot be rejected solely by relying on the time-limit prescribed in Section 54 of the GST law. Retention of such amounts, the Court held, would infringe Article 265 of the Constitution of India, which prohibits collection or retention of tax without authority of law.

Background of the Dispute

The assessee challenged an order dated 22nd October, 2025 passed in Form GST RFD-06 by the Joint Commissioner of State Tax, CT 86 GST Circle, Cuttack-I East, rejecting a refund application for the period 1st April, 2019 to 31st March, 2020.

Key factual matrix

  • A proceeding under Section 74 of the Central Goods and Services Tax Act, 2017 and the Odisha Goods and Services Tax Act, 2017 (collectively “the GST Act”) was initiated on 1st December, 2020 for FY 2019-20.
  • Scrutiny of returns showed that although Tax Deducted at Source credit was received in several months of 2019, the GSTR‑3B returns for those months showed NIL tax liability, leading the department to issue a Show Cause Notice dated 2nd February, 2022 in Form GST DRC‑01.
  • In its reply dated 2nd March, 2022, the assessee explained that:
    • It had already filed the annual return on 8th February, 2021.
    • It had paid the alleged differential tax liability under both the CGST and OGST along with applicable interest using the Electronic Credit Ledger, via Form GST DRC‑03 dated 8th February, 2021.
  • Subsequently, on 18th September, 2022, on erroneous advice that tax liability must be discharged only through the Electronic Cash Ledger, the assessee again paid:
    • Rs. 6,01,645/- under the CGST, and
    • Rs. 6,01,645/- under the OGST,
      this time through the Electronic Cash Ledger, again using Form GST DRC‑03.

Thus, for the same set of transactions for FY 2019‑20, the tax was discharged twice—once from the Credit Ledger and again from the Cash Ledger.

Closure of Section 74 proceedings

On 8th November, 2024, the Assistant Commissioner of State Tax, CT 86 GST Circle, Cuttack-I East, after verifying the records and audit findings, passed an order dropping the Section 74 proceedings. The order clearly recorded that:

  • The assessee had:
    • Filed the annual return for FY 2019‑20 on 08.02.2021,
    • Paid all differential taxes via DRC‑03,
    • And had also paid the applicable interest in a later DRC‑03 dated 02.03.2022.
  • The GST audit for FY 2019‑20 had been completed.
  • The assessee’s compliance was found genuine.
  • Accordingly, the proceedings were dropped.

Discovery of double payment and refund claim

Only after the Section 74 proceeding was dropped did the assessee realise that it had inadvertently deposited GST twice for the same period:

  1. First payment: via Credit Ledger on 08.02.2021.
  2. Second payment: via Cash Ledger on 18.09.2022.

To correct this error, the assessee:

  • Filed Form GST RFD‑01 on 23rd August, 2025,
  • Claiming refund of the total double-paid amount of Rs. 12,03,290/-
    (Rs. 6,01,645/- as CGST + Rs. 6,01,645/- as OGST).

Along with the refund application, the assessee submitted:

  • Copies of both DRC‑03 challans (dated 08.02.2021 and 18.09.2022),
  • A cancelled cheque to facilitate electronic transfer of the refund.

Rejection of Refund Application by Department

On 19th September, 2025, the Joint Commissioner of State Tax (the Proper Officer) issued a Show Cause Notice in Form GST RFD‑08, alleging that:

“The taxpayer has applied refund in Form GST RFD-01 beyond the relevant date in contravention of explanation to Section 54(14)(2)(h) of the OGST/CGST Act, 2017.”

Assessee’s defence before the Proper Officer

In a detailed reply dated 3rd October, 2025, the assessee contended:

  • The Section 74 proceedings for FY 2019‑20 concluded with an order dated 8th November, 2024, where the department accepted that tax liability was discharged.
  • The refund application filed on 23rd August, 2025 was therefore within the limitation framework when seen in context.
  • Even otherwise, when tax is paid twice for the same liability, refund cannot be denied on a purely technical ground of limitation.

However, the Proper Officer passed an order dated 22nd October, 2025 in Form GST RFD‑06, rejecting the refund solely on the basis that: