Refund Cannot be Denied for Pre-18.07.2022 Period Merely Due to Later Filing: Gujarat HC Set Aside Rejection of Refund Claim [Read Order]

The Gujarat High Court has ruled that refund applications relating to the period prior to 18.07 2022 cannot be denied under the Goods and Services Tax merely because they were filed after that date.

The Court held that once refund claims are within the statutory limitation prescribed under Section 54 of the Central Goods and Services Tax Act, 2017, they cannot be rejected by applying the restriction introduced prospectively by Notification No. 9/2022–Central Tax (Rate).

M/s. Kush Proteins Pvt. Ltd. and another, engaged in the manufacture and trading of edible oil, palmolein oil, mustard oil, and cattle feed classified under Chapter 15 of the Customs Tariff Act, 1975, were subject to an inverted tax structure where input tax rates were higher than the output tax rate of 5%. Due to this, the company accumulated Input Tax Credit and filed refund applications under Section 54(3) of the Central Goods and Services Tax Act, 2017, for periods prior to 18.07.2022.

The Assistant Commissioner, Central Goods and Services Tax and Excise, rejected the refund applications through an order dated 31.03.2023. The first appellate authority upheld this rejection through an order dated 2.02.2024. Aggrieved, the company approached the Gujarat High Court under Article 226 of the Constitution of India.

Represented by Nirav Shah, the petitioner contended that the refund applications were filed within the statutory time limit of two years under Section 54(1) of the Central Goods and Services Tax Act, 2017. It was argued that Notification No. 9/2022-Central Tax (Rate), which restricts refund of accumulated credit on certain oils under Chapter 15, came into effect only from 18.07.2022, and therefore cannot govern refund entitlement for earlier periods.

It was submitted that the Authorities illegally relied upon Circular No. 181/13/2022 dated 10.11.2022, which wrongly treated refund applications filed on or after 18.07.2022 as ineligible despite the entitlement relating to prior periods. It was further submitted that the said restriction could apply prospectively only.

It was urged that the Court’s ruling in Patanjali Foods Ltd. v. Union of India (2025) has already settled that such restrictions cannot be applied to past tax periods.

The Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi held that the Notification No. 9/2022-Central Tax (Rate) introducing restrictions on refund applies prospectively only. Therefore, refund claims pertaining to periods before 18.07.2022 cannot be rejected solely because they were filed later.

The Court ruled that the Circular No. 181/13/2022 cannot override statutory provisions or valid refund entitlement. Subsequently, it was held that the denial of refund despite compliance with the limitation under Section 54(1) is illegal and arbitrary and violates Article 14 of the Constitution.

Consequently, the orders dated 31.03.2023 and 29.02.2024 were quashed. Accordingly, the refund eligibility of the petitioner stands restored.

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