Karnataka High Court rules that delayed intra-departmental communication cannot extend GST appeal limitation, reinforcing Section 107 of the CGST Act and legal certainty for taxpayers.
The Karnataka High Court has delivered an important ruling on limitation for filing GST appeals by the Revenue, holding that the tax department cannot extend the statutory limitation period by relying upon delays in internal departmental communication or post-audit procedures.
In The Commissioner of Central Tax v. M/s Jeans Knit Private Limited, the Division Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha held that the limitation period prescribed under Section 107 of the CGST Act, 2017 cannot be kept open-ended merely because an adjudication or refund order was communicated internally to another departmental authority at a later stage.
The decision reinforces the principle that statutory limitation must operate with certainty and that administrative delays within the tax department cannot prejudice the taxpayer.
Background of the Case
The dispute involved Jeans Knit Private Limited, a 100% Export Oriented Unit engaged in the manufacture and export of garments.
The company had claimed refunds of accumulated and unutilised Input Tax Credit relating to the period from July to December 2017. Six refund orders were subsequently issued between January and March 2018, sanctioning an aggregate refund of approximately ₹33.88 crore.
The Revenue subsequently examined these refund orders through its internal review and post-audit mechanism. It took the view that the company had wrongly received refund relating to input tax credit attributable to capital goods.
Based on this review, the department authorised appeals before the GST Appellate Authority. Since the appeals were filed beyond the ordinary statutory period, the Revenue also sought condonation of delay.
Dispute Over Limitation
The principal question before the Court was whether the Revenue could calculate the limitation period from the date on which the refund order was internally communicated to the reviewing authority rather than from the date on which the order was issued.
The department argued that the refund orders had been subjected to post-audit and that the subsequent internal communication and review process justified the filing of appeals at a later stage.
The taxpayer, however, contended that the appeals were clearly beyond the period prescribed under Section 107(2) of the CGST Act.
The Commissioner (Appeals) had initially rejected the taxpayer’s limitation objection, reasoning that the appeals arose from a post-audit exercise and that the department could potentially recover an erroneous refund through other statutory provisions.
The Single Judge of the Karnataka High Court subsequently found the Revenue’s appeals to be barred by limitation. The Revenue challenged that decision before the Division Bench.
Karnataka High Court’s Findings
The Division Bench upheld the decision against the Revenue.
The Court emphasised that Section 107(2) of the CGST Act requires the Revenue to direct an authorised officer to file an appeal within six months from the communication of the adjudication order.
The Court also noted that Section 107(4) permits the Appellate Authority to condone delay only for a further period of one month, where sufficient cause is established. Therefore, the power of condonation cannot be exercised beyond the statutory limit.
The Court rejected the proposition that departmental post-audit or internal correspondence could indefinitely postpone the commencement of limitation.
It observed that the GST framework requires departmental review mechanisms to operate within defined timelines. Consequently, internal administrative processes cannot be used to create an uncertain or extended limitation period.
Internal Departmental Delay Cannot Benefit the Revenue
One of the most significant aspects of the ruling is the Court’s treatment of intra-departmental communication.
The Court referred to the statutory mechanism under Section 169(1)(d) of the CGST Act, under which a decision or order may be served by making it available on the common GST portal.
The Bench also relied upon the principle recognised by the Delhi High Court in Grapes Digital Pvt. Ltd. v. Principal Commissioner, concerning the interpretation of “communication” in the context of internal departmental proceedings.
The Karnataka High Court made it clear that the limitation period cannot be made indeterminate merely because one departmental authority communicates the order to another authority at a later date.
In other words, administrative delay within the tax department cannot enlarge a statutory right of appeal beyond the period prescribed by Parliament.
Post-Audit Does Not Restart Limitation
The Revenue’s reliance on the post-audit process was also rejected.
The Court held that the date of audit or the date on which audit objections are raised is not relevant for calculating the limitation period for an appeal under Section 107.
The department is expected to complete its review and audit process within the prescribed administrative framework and take appropriate action within the statutory appeal period.
This is particularly important for taxpayers because otherwise an internal departmental review could potentially keep an otherwise concluded refund order vulnerable to challenge for an indefinite period.
Recovery Proceedings Cannot Cure a Time-Barred Appeal
The Court also rejected the Revenue’s argument that an allegedly erroneous refund could alternatively be recovered under Sections 73 or 74 of the CGST Act.
The Bench clarified that whether the department may have an independent statutory mechanism for recovery of an erroneous refund is a separate question. Such provisions cannot be used to validate an appeal that has already become barred by limitation.
Thus, the existence of a possible recovery remedy does not extend the statutory period for filing an appeal under Section 107.
Final Decision
The Karnataka High Court dismissed the Revenue’s appeal and upheld the finding that the departmental appeals were barred by limitation.
The Court also held that the Commissioner (Appeals) lacked jurisdiction to condone the delay beyond the additional one-month period expressly permitted under Section 107(4).
Key Takeaway for GST Taxpayers
The ruling is significant because it reinforces certainty in GST litigation. The Revenue cannot rely upon delayed internal communication, post-audit proceedings or departmental correspondence to extend the statutory limitation period for filing an appeal.
For taxpayers, the judgment provides an important defence where a departmental appeal has been filed beyond the statutory period. Whenever such an appeal is received, the taxpayer should carefully examine the date of the original order, date of communication, date of departmental authorisation and date of filing of the appeal.
If the statutory period has expired and the delay exceeds the limited condonable period, the taxpayer can raise a specific objection on limitation and jurisdiction.
The decision therefore serves as a strong reminder that limitation provisions under GST are not merely procedural technicalities; they provide legal certainty and cannot be diluted by administrative delays within the tax department.
Case Details:
The Commissioner of Central Tax v. M/s Jeans Knit Private Limited, Writ Appeal No. 966 of 2026 (T-RES), Karnataka High Court; reported citation 2026 LLBiz HC (KAR) 185. The decision was dated September 16, 2026.