• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
August 16, 2023

M/s. Cosmol Energy Pvt. Ltd. vs State of Gujarat: Resolving Refund Dilemma:

M/s. Cosmol Energy Pvt. Ltd. vs State of Gujarat: Resolving Refund Dilemma:


The case of M/s. Cosmol Energy Pvt. Ltd. against the State of Gujarat revolves around seeking a refund of GST paid under the Reverse Charge Mechanism (RCM) for ocean freight charges incurred outside the non-taxable territory. The dispute arose when the Revenue Department of Gujarat issued a Deficiency Memo based on the limitation period prescribed by Section 54 of the CGST Act.

What is Deficiency Memo?

The deficiency memo so issued in Form GST RFD-03 instructs the applicant to rectify the deficiency and file a new refund application.

Case Background:

M/s. Cosmol Energy Pvt. Ltd., the writ applicant, applied for a refund of IGST paid on ocean freight under RCM, following the precedent set by the Gujarat High Court’s decision in Mohit Minerals Pvt. Ltd. vs Union of India. The Department countered by claiming that the applicant’s refund claim was beyond the limitation period stipulated in Section 54 of the CGST Act. This led to the issuance of a Deficiency Memo on July 17, 2020.

Central Issue:

The central matter of the case revolves around the applicant’s pursuit of a refund for IGST paid under RCM, despite the department’s assertion that the claim fell outside the limitation period defined by Section 54.

Observation and Judgment:

Article 265 of the Constitution of India emphasizes that taxes can only be levied under the authority of the law. Since IGST was collected without legal authorization, it should rightfully be refunded to the applicant.

The department referred to Section 54, which pertains to tax collection under the law. In this case, the tax was collected erroneously and should be returned to the applicant.

The applicant’s entitlement to a refund within the defined limitation period hinges on Section 17(1). The limitation period starts only when fraud or mistake is detected.

The court, acting under Article 226 of the Constitution, granted the following reliefs:

  • Quashing the two Deficiency Memos issued on July 17, 2020.
  • Directing tax authorities to refund Rs. 93.54 Lakhs along with interest, which was mistakenly paid.
  • Setting aside the deficiency memos and processing the refund claim for an amount of Rs. 93.54 Lakhs with a 6% annual interest rate.
  • Requiring the refund process to be completed by August 17, 2021.


The court’s decision in favor of M/s. Cosmol Energy Pvt. Ltd. underscores the significance of adhering to legal provisions and limitation periods in GST refund cases. The ruling underscores the principle that taxes must be collected lawfully, and when collected erroneously, they should be rightfully returned.

Enter your email address:

Subscribe to faceless complainces

Please follow and like us:
Pin Share
Follow by Email