The Hon’ble Delhi High Court in the case of Delhi Metro Rail Corporation Ltd. v. Commissioner (Appeals-II) & Anr. [W.P.(C) 10635/2022, dated May 21, 2025] held that where excess GST becomes ascertainable only after a conciliation settlement having the force of a decree, the limitation for refund runs from the date of such settlement under Explanation 2(d) to Section 54; hence, rejection of DMRC’s refund claim as time‑barred was unsustainable.
Facts:
Delhi Metro Rail Corporation Ltd. (“DMRC”) (“the Petitioner”) entered a rental agreement dated May 8, 2015, with M/s Kamal Sponge Steel & Power Ltd. (“KSSPL”). Disputes over lease rentals were referred to conciliation, and a conciliation agreement dated August 03, 2021, retrospectively reduced KSSPL’s liability by 40%. This resulted in an excess payment of GST by DMRC amounting to ₹83,36,182 for the tax period July 2017 to March 2019, based on the originally agreed transaction value prior to conciliation.
The Commissioner (Appeals) & Anr. (“the Respondents”) rejected DMRC’s refund applications dated January 17, 2021, and March 21, 2021, treating them as time‑barred by Limitation. The Department asserted that limitation began in 2017 when the tax was paid, and that DMRC should have issued credit notes under Section 34.
The Petitioner contended that the exact refundable amount became ascertainable only upon the conciliation settlement, which, being equivalent to a judgment/decree under Section 73 of the Arbitration & Conciliation Act, brings the claim within Explanation 2(d) to Section 54 of the Central Goods and Services Tax Act, 2017 (“CGST Act”). The Respondents insisted that Explanation 2(h) was applied for calculating Limitation period. Aggrieved, DMRC filed a writ petition under Article 226 challenging the orders dated March 03, 2021, and May 18, 2021, rejecting its refund claims.
Issue:
Whether the refund claims filed by DMRC were within the limitation period prescribed under Section 54 of the CGST Act, and specifically, whether the “relevant date” fell under Explanation 2(d) or Explanation 2(h)?
Held:
The Hon’ble Delhi High Court in W.P.(C) 10635/2022 held as under:
- Observed that, under Section 89 CPC, conciliation settlements are recognised; the conciliation agreement here, executed on August 3, 2021, is legally equivalent to an arbitral award/decree under Section 36 of the Arbitration & Conciliation Act.
- Noted that, Explanation 2(d) to Section 54 applies when tax becomes refundable “as a consequence of judgment, decree, order or direction” of a court or tribunal and Explanation 2(h) is applicable only when all the other explanations don’t and is merely residual.
- Held that, the excess GST became ascertainable only upon final settlement by the Conciliation award, making that date the “relevant date” under Explanation 2(d). Refund applications filed on January 17, 2021, and March 21, 2021, were therefore well within the statutory two‑year period.
- Further set aside the impugned orders dated March 03, 2021 and May 18, 2021 rejecting the refunds and directed the Department to process and credit the refund of ₹83,36,182 with applicable interest to DMRC within one month.
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