Time-Barred GST Refund Claim Cannot Trigger Deficiency Memo: Madras High Court

The Madras High Court has held that a GST deficiency memo cannot be issued merely because a refund application is time-barred, as such a memo is meant to address a remediable defect in the application.

Justice Senthilkumar Ramamoorthy on 1 September, disposed of a deficiency memo issued to L.S. Pacific Wood Tech Pvt. Ltd. after it sought a refund under Section 54 of the GST enactments. The Bench observed that “a deficiency memo cannot be issued on the ground that the refund application is time barred.”

L.S. Pacific Wood Tech had filed a refund application in Form GST RFD-01 on 18 August 2025. The Commercial Tax Officer subsequently issued a deficiency memo dated 16 April 2026, stating that the refund claim was time-barred.

The petitioner then challenged the memo before the High Court. It relied on Rules 90(3) and 92(3) of the GST Rules, submitting that a deficiency memo under Rule 90(3) can be issued only when a remediable defect is found in the refund application. It argued that if the officer proposes to reject the refund claim, the procedure prescribed under Rule 92(3) requires issuance of a show cause notice.

The Court noted that Rule 92(3) provides that where the proper officer considers the whole or part of a refund claim inadmissible or not payable, a notice must be issued to the applicant, followed by consideration of the taxpayer's reply before an order is passed on the claim. It held that this procedure must be followed where the department proposes to reject the whole or part of a refund claim.

Further, the Bench explained that Rule 90(3) concerns deficiencies in a refund application and permits the applicant to file a fresh application after rectifying such deficiencies. The rule also provides for exclusion of the relevant period while computing the limitation period under Section 54(1).

It directed that no further action be taken pursuant to the impugned deficiency memo. It granted liberty to the department to issue a show cause notice under Rule 92(3), if it intended to reject the refund claim wholly or partly, within two weeks from receipt of the order.

Accordingly, the High Court disposed of the writ petition with no order as to costs.

For the Petitioner: Advocate N.V. Lakshmi

For the Respondent: Special Government Pleader (Tax) G. Dhana Madhri