Amended Formula U/R 89 (5) For Inverted Duty Refunds Is Retrospectively Applicable: Andhra Pradesh HC

The Andhra Pradesh High Court has held that the amended formula under Rule 89 (5) of the GST Rules for inverted duty refunds is retrospectively applicable. The bench of Justice R Raghunandan Rao and Justice T.C.D.Sekhar has observed that the amendment to the formula in Rule 89(5) has to be treated to be clarificatory in nature and consequently would be retrospective. Though the orders of rejection as well as the appellate order were passed prior to the amendment, the fact remains that the petitioner had continued to agitate his claims in regard to the refund sought by the petitioner/assessee. The petitioner/assessee, M/s AWL Agri Business Limited, is engaged in importing edible oil, refining it, and supplying it in the domestic market after packaging. The company had filed three separate applications seeking refund of accumulated Input Tax Credit (ITC) for November 2018, March 2019, and April 2019, citing an inverted duty structure. The refund claims were made under Section 54 of the CGST Act. However, the adjudicating authority rejected the applications, holding that Rule 89(5) of the CGST Rules precluded such refunds under the prescribed formula. Subsequent appeals were also dismissed by the appellate authority through Order-in-Appeal dated February 25, 2022. Aggrieved, the petitioner approached the High Court under Article 226 of the Constitution seeking quashing of the appellate order and refund of ₹48,29,179 for April 2019 along with interest at 6% under Section 56 of the CGST Act. The central issue before the Court was whether the amendment to the formula prescribed under Rule 89(5) — made pursuant to deliberations of the GST Council — was clarificatory and retrospective in nature, or prospective as claimed by the revenue authorities. The petitioner contended that the GST Council, in its meeting held on June 28–29, 2022, took cognizance of anomalies in the refund formula. The amendment was made following observations of the Supreme Court in Union of India v. VKC Footsteps India Pvt. Ltd. (2022) 2 SCC 603. The change was clarificatory in nature and should therefore apply retrospectively. Since the refund claims were continuously under challenge, the modified formula ought to be applied. The department relied upon Circular No. 181/13/2022-GST dated November 10, 2022, which clarified that the amendment would operate prospectively with effect from July 5, 2022. It was argued that since the rejection and appellate orders were passed prior to the amendment, the benefit could not be extended to the petitioner. The petitioner relied on the judgment of the Gujarat High Court in Tirth Agro Technology Pvt. Ltd. v. Union of India(2025), where the High Court had set aside the circular to the extent it declared the amendment to Rule 89(5) as prospective. The Andhra Pradesh High Court observed that once a circular is set aside by a High Court, it would stand invalidated across the country. The Division Bench held that the amendment to the formula under Rule 89(5) must be treated as clarificatory in nature. Consequently, it would operate retrospectively. Though the original rejection and appellate orders were passed before the amendment, the petitioner had continued to pursue its claims. Therefore, the applications must be reconsidered by applying the modified formula. The Court allowed the writ petitions and set aside the primary rejection orders dated June 9, 2021; January 13, 2021; and March 24, 2021; set aside the appellate order dated February 25, 2022; and directed the primary authority to reconsider the refund applications afresh by applying the amended formula under Rule 89(5). Case Details Case Title: M/S. AWL Agri Business Limited Versus The Joint Commissioner Citation: JURISHOUR-60-HC-2026(AP) Case No.: Writ Petition Nos: 28622, 28632 & 28708 Of 2025 Date: 21/01/2026 Counsel For Petitioner: Karan Talwar Counsel For Respondent: Santhi Chandra Click Here To Read Order Read More: SCN Uploaded Only in ‘Additional Notices’ Tab; No Email/Postal Service: Calcutta High Court Quashes GST Adjudication

Amended Formula U/R 89 (5) For Inverted Duty Refunds Is Retrospectively Applicable: Andhra Pradesh HC

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