The Rajasthan High Court has quashed part of a CBIC Circular No. 181/13/2022-GST dated 10.11.2022 that blocked GST refund claims under the inverted duty structure for mustard oil and similar goods.
The bench of Justice Dinesh Mehta and Justice Sangeeta Sharma has the circular’s distinction between refund applications filed before and after July 18, 2022, was arbitrary, discriminatory, and violative of Article 14, since the parent notification did not prescribe such a condition.
The petitioner, Shree Arihant Oil and General Mills, a manufacturer of edible oils based in Sri Ganganagar, had purchased raw materials such as mustard oil under HSN Code 1514 by paying applicable GST. Under the GST framework, Section 54(3) of the Central Goods and Services Tax Act, 2017 allows refund of unutilised ITC in cases where the tax paid on inputs is higher than the tax levied on output supplies – a situation known as the inverted duty structure.
On 13 July 2022, the government issued Notification No. 09/2022-Central Tax (Rate), placing certain goods (including those under HSN 1514) in the negative list, thereby disallowing refunds of accumulated ITC on them. Importantly, this notification was made effective prospectively from 18 July 2022, meaning purchases made before that date should still be eligible for refunds.
Acting on this position, Shree Arihant Oil filed applications for ITC refund on 4 January 2023 for the period prior to 18 July 2022. However, authorities did not process the applications. Instead, they relied on CBIC Circular No. 181/13/2022-GST dated 10 November 2022, which clarified that refund claims would be admissible only if applications had been filed before 18 July 2022. This effectively barred taxpayers who filed refund claims after that date, even for periods prior to 18 July 2022.
The court observed that the notification dated 13 July 2022 applied prospectively, and therefore refunds for taxes paid before 18 July 2022 could not be denied. The CBIC’s circular created an artificial classification between taxpayers who filed refund claims before 18 July 2022 and those who filed afterwards, even for the same period. This was held to be arbitrary and discriminatory. ITC is an indefeasible right accruing at the time of purchase of goods, and curtailing it retrospectively through a circular is unconstitutional.
The Court also referred to similar rulings by the Gujarat High Court in Patanjali Foods Ltd. and by the Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. and Gemini Edibles and Fats India Ltd., which were later upheld by the Supreme Court in May 2025.
The Rajasthan High Court quashed Point No. 2 of CBIC Circular No. 181/13/2022-GST as illegal and violative of Article 14. It directed authorities to process Shree Arihant Oil’s refund applications filed in January 2023 within three months, without applying the quashed circular restriction.
Case Details
Case Title: Shree Arihant Oil and General Mills Versus Union Of India
Case No.: D.B. Civil Writ Petition No. 2932/2023
Date: 08/09/2025
Counsel For Petitioner: Sanjeev Johari, Sr. Counsel assisted by Mr. Shubhankar Johari
Counsel For Respondent: Mahaveer Bishnoi, AAG
