CBIC Circular on Refunding Unutilised GST ITC u/r 89(5) Not Prospective: Supreme Court Dismisses Revenue SLP with ₹10K Costs [Read Judgement]

The Supreme Court of India recently dismissed a Special Leave Petition (SLP) filed by the Union of India in a dispute over the refund of unutilised Input TaxCredit (ITC) under the inverted duty structure, noting that the relevant issue had already been decided upon by the Court and directed the Revenue to deposit ₹10,000 with the Advocate-on-Record Association.

The present case, filed by the Union of India and Others against Tirth Agro Technology Pvt. Ltd. and others (Tirth Agro) arose from an impugned judgment passed by the High Court of Gujarat at Ahmedabad.

The controversy arose from refund applications under Section 54(3) of the Central Goods and Service Tax (CGST) Act, 2017 read with Rule 89(5) of the CGST Rules, 2017. Before 5 July 2022, the formula excluded input services, restricting refunds to ITC accumulated on input goods.

Notification No. 14/2022, amended the formula under Rule 89(5) to include both input goods and input services proportionately to determine refunds, but a subsequent CBIC circular dated 10 November 2022 clarified that the benefit would apply prospectively. This gave rise to multiple writ petitions, including the one filed by Tirth Agro before the Gujarat High Court.

In its judgment dated 20 December 2024, the Gujarat High Court followed its earlier decision in Ascent Meditech Ltd. vs Union of India (2024), holding that the July 2022 amendment was in fact clarificatory and curative and thus retrospective in nature. In Ascent Meditech (supra), the Gujarat High Court quashed the CBIC circular to the extent it denied retrospective effect and directed authorities to recompute refund claims filed within the statutory two-year period under Section 54(1) by applying the amended formula.

Aggrieved by the High Court ruling, the Union of India approached the Supreme Court through the present SLP. The matter was heard by a Bench of Justice Rajesh Bindal and Justice R. Mahadevan.

The petitioners were represented by V.C. Bharathi, Kiran Bhardwaj and Gurmeet Singh Makker while the respondents were represented by Malika Josi and Suhaas Ratna Josi.

The Court observed that the Gujarat High Court had relied on its earlier ruling in Ascent Meditech Ltd. (supra), and the Union’s challenge in that case had already been dismissed by the Supreme Court in SLP (C) No. 8134 of 2025 on 28 March 2025. The Bench noted that the present petition had been filed in June 2025 and that no mention had been made regarding the factum of dismissal of the petition by the High Court.

Accordingly, the Supreme Court dismissed the SLP while imposing costs of ₹10,000 on the Union of India - which was directed to be deposited with the Advocate-on-Record Association.

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