In a recent landmark decision, the Gujarat High Court has clarified that a rectified refund application filed after a deficiency memo under Rule 90(3) of the CGST Rules, 2017 cannot be treated as a fresh refund claim. Instead, it is a continuation of the original claim filed within the statutory limitation period.
The case of M/s VARIDHI COTSPIN PRIVATE LIMITED v. Union of India & Ors. (07.10.2025) involved a refund claim under Section 54 of the CGST Act, 2017 for unutilized input tax credit (ITC) on zero-rated supplies made without payment of tax.
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The original refund application was filed within the prescribed two-year limitation period.
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The proper officer issued a deficiency memo (Form GST RFD-03) highlighting discrepancies and requiring the taxpayer to submit a rectified application.
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The taxpayer complied and filed the rectified refund application.
The department, however, rejected the rectified application, arguing it was filed after the limitation period, treating it as a new refund claim.
Issue
Whether a rectified refund application filed under Rule 90(3):
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Should be treated as a continuation of the original timely claim, or
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Is a fresh application subject to the limitation period under Section 54(1).
Court’s Observations
The Gujarat High Court provided clarity on the interplay between limitation and rectification:
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Deficiency Memo Does Not Extinguish Rights:
The issuance of a deficiency memo points only to technical or procedural defects and does not extinguish the taxpayer’s substantive right to claim a refund. -
Rectified Claim Relates Back:
The rectified refund application relates back to the date of the original claim, which was filed within time. Limitation ceases to run once the original claim is submitted. -
Purpose of Rule 90(3):
Treating a rectified claim as a fresh application would defeat the purpose of Rule 90(3), which enables taxpayers to correct procedural errors without losing their substantive rights.
Decision
The Court held that:
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A rectified refund application is not a fresh claim.
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The rejection by the department was quashed.
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The department was directed to process the refund on merits.
Key Takeaways for Taxpayers
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File timely: Always ensure the original refund application is submitted within the limitation period.
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Address deficiencies promptly: Rectifying errors under Rule 90(3) does not restart the limitation period.
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Substantive rights protected: Taxpayers cannot be penalized for procedural defects highlighted by the department.
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Practical insight: This ruling reinforces that rectifications are procedural; substantive claims remain protected.
Case Citation:
M/s VARIDHI COTSPIN PRIVATE LIMITED v. Union of India & Ors., Gujarat High Court, dated 07.10.2025
