Is limitation period of 2 years applicable to duplicate payments under GST law?

[Order of the Division Bench of the Hon'ble High Court of Orissa, dated 12.02.2026, in WP(C) no. 2271/2026]

The Hon'ble Delhi High Court, in Delhi Metro Rail Corporation Ltd. v. Additional Commissioner, Central GST Appeals-II [2023:DHC:6874-DB] held that the period of limitation for applying for a refund (as prescribed under Section 54 of the CGST Act) would not apply where GST is not chargeable and it is established an amount has been deposited under a mistake of law.

Similarly, the Hon'ble Gujarat High Court, in Comsol Energy (P.) Ltd. v. State of Gujarat [R/Special Civil Application No. 11905 of 2020, vide judgment dated 21.12.2020), held that where a taxpayer deposited an amount under a mistaken notion, the same is not liable to be retained by the State in view of Article 265 of the Constitution of India (which provides that no tax shall be levied or collected except by authority of law).

Therefore, the period of two years stipulated for applying for refund under Section 54 ibid is not applicable in cases involving duplicate payments since retaining the amount paid in excess of tax liability by the State is hit by inhibition enshrined in Article 265 ibid.

The Hon'ble Supreme Court, in Shri Vallabh Glass Works Ltd. v. Union of India [vide judgment dated 14.03.1984 arising from Civil Appeal no. 3338 of 1979], held that if the appellants had filed a suit within the period of limitation of three years, the excess amount would have become refundable by virtue of Section 72 of the Indian Contract Act. Section 17(1)(c) of the Limitation Act, 1963 provides that where, in the case of any suit or application for which a period of limitation is prescribed under that Act, the suit or application is for relief from the consequence of a mistake, the period of limitation shall not begin to run until the plaintiff or applicant had discovered it or could have discovered it with reasonable diligence.

While it is evident that the limitation of two years prescribed under Section 54 of the CGST Act, 2017 is not applicable in case of duplicate payments, it should also be noted that a refund application cannot be filed after an indefinite period. Hence, in such cases where the limitation under Section 54 ibid is breached, the applicant must be able to demonstrate the time of discovery of such mistake (or when it could have been discovered with reasonable diligence).

Nevertheless, at the field level, despite multiple rulings, refund applications are rejected on the grounds of limitation period prescribed under Section 54 ibid in disregard of Article 265 ibid. Cognizance of such rulings would help in reducing unnecessary litigation.

Srinivasan V, Advocate