GST ITC refund claimed within S. 54(1) Timeline cannot be Denied by Executive Circulars: Calcutta HC Grants Relief to Adani Wilmer [Read Order]

The Calcutta High Court has held that a refund claim for accumulated unutilised Input Tax Credit ( ITC ), filed within the statutory timeline prescribed under Section 54(1) of the GST ( Goods and Services Tax ) Act, 2017, cannot be denied on the basis of subsequent executive circulars seeking to curtail such right retrospectively.

The petition was filed by M/s Adani Wilmer Limited. The company is engaged in the manufacture and supply of edible oil and other food products, and had applied for refund of accumulated ITC for May 2021 arising from an inverted duty structure where the tax rate on inputs was higher than that on outward supplies. The refund application was filed on 16 June 2023.

However, the proper officer rejected the claim relying on Central Circular No. 181/13/2022-GST dated 10 November 2022 and corresponding State Circular dated 14 November 2022.

The stated circular clarified that restrictions introduced by Notification dated 23 August 2022 would apply to all refund applications filed on or after 18 July 2022. The appellate authority upheld this rejection.

Before the High Court, the petitioner contended that its right to claim refund accrued once returned filed under Section 39 for the relevant tax period.

It also submitted that Section 54(1) expressly allows refund applications to be filed within two years from the “relevant date.” In the present case, the relevant date was 20 June 2021, being the due date for filing the return and therefore the refund application filed on 16 June 2023 was within the statutory two-year window.

Also read: Two GST Adjudication Orders Issued, Both Bereft of Facts on Excess ITC Allegations: Calcutta HC Directs Provision of Particulars [Read Order]

It was argued that an executive circular could not retrospectively curtail a vested statutory right granted by the legislature.

The high court noted the Supreme Court ruling in Harshit Harish Jain v. State of Maharashtra, observed that while limitation laws may ordinarily operate retrospectively, a provision that curtails an existing limitation period cannot apply to accrued causes of action.

Justice Om Narayan Rai also noted that several other High Courts including Andhra Pradesh, Gujarat, Allahabad and Rajasthan had held that refund applications filed within the statutory period under Section 54(1) cannot be rejected merely because they were filed after issuance of clarificatory circulars, provided the right to refund had accrued prior thereto.

Accordingly, the bench directed the proper officer to reconsider the refund application on merits in accordance with law. The court also said that the matter should be disposed of without being influenced by the impugned circulars.

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