GST Refund Limitation Can’t Be Curtailed Retrospectively: J&K HC Upholds Vested Right to Claim Inverted Duty Refund

The High Court of Jammu & Kashmir and Ladakh has held that amendments curtailing the limitation period for claiming refunds under Section 54 of the CGST Act, 2017 cannot be applied retrospectively to defeat vested rights to Claim Inverted Duty refund that had already accrued prior to the amendment. The Bench of Justice Sindhu Sharma and Justice Shahzad Azeem observed that a vested right to claim refund accrues when the taxable event and statutory entitlement arise, and such a right cannot be taken away by a subsequent amendment unless the legislature expressly provides for retrospective operation. The amendment to Section 54, which curtailed the limitation period by redefining “relevant date,” cannot be applied retrospectively to periods prior to 01.02.2019. Applying the amended provision retrospectively would unjustly extinguish accrued rights, which is impermissible in law. The petitioner, Bharat Oil Traders, is a partnership firm engaged in the refilling and sale of edible oil and ghee and is registered under the Central and State GST Acts. Owing to a higher rate of tax on inputs as compared to outward supplies, the firm suffered an inverted tax structure, entitling it to a refund of accumulated input tax credit (ITC) under Section 54(3)(ii) of the CGST/SGST Acts. The refund claims pertained to the period July 2017 to March 2019, covering financial years 2017–18 and 2018–19. The petitioner filed a consolidated refund application on 02 February 2021, which was rejected by the adjudicating authority primarily on the ground that it was time-barred. The appellate authority also dismissed the appeal, without considering the impact of CBIC Notification No. 13/2022 dated 05 July 2022, which excluded the COVID-19 period from limitation. The central question before the High Court was whether the amendment to Section 54 of the CGST Act, effective from 01 February 2019, which changed the definition of “relevant date” for refund claims, could be applied retrospectively so as to curtail the limitation period for claims relating to periods prior to the amendment. Before the amendment, the “relevant date” for refund of unutilised ITC under an inverted duty structure was defined as “the end of the financial year in which such claim for refund arises.” Post-amendment, it was substituted with “the due date for furnishing the return under Section 39 for the period in which the claim arises.” The petitioner contended that the amendment to Section 54 is substantive in nature and therefore operates prospectively, unless expressly stated otherwise. For periods prior to 01.02.2019, the unamended definition of “relevant date” would continue to apply, preserving the vested right to claim refund within two years from the end of the relevant financial year. Since the limitation period for the relevant refund claims expired in March 2020, the benefit of exclusion of limitation from 01.03.2020 to 28.02.2022, as granted by the Supreme Court’s suo motu COVID orders and Notification No. 13/2022, squarely applied. The rejection of refund for January to March 2019 on the ground of “ineligible inputs” was unreasoned and unsupported by specific findings. The GST Department argued that all refund applications filed on or after 01.02.2019 were governed by the amended Section 54, irrespective of the period to which the refund related. Consequently, refund claims for July 2017 to January 2018 were already barred by limitation even before the COVID exclusion period. Refund for January to March 2019 was rejected as no eligible inputs were received during that period. However, the Senior Standing Counsel fairly conceded that, in view of Notification No. 13/2022, refund claims for February 2018 to December 2018 were not time-barred. The Court relied heavily on the Supreme Court’s decision in Harshit Harish Jain v. State of Maharashtra (2025), as well as earlier landmark rulings such as M.P. Steel Corporation, New India Insurance Co. Ltd. v. Shanti Misra, and Prism Cement Ltd., reiterating that a shorter limitation period introduced by amendment cannot destroy an existing cause of action. The Bench held that refund claims for July 2017 to January 2018 were validly claimable up to March 2020 under the unamended law and therefore benefited from the COVID-related exclusion of limitation. Refund claims from February 2018 to December 2018 were admittedly within limitation under the amended law read with Notification No. 13/2022. Refund claims for January 2019 to March 2019 were also not barred by limitation, and their rejection on the ground of ineligible inputs was unsupported by a reasoned order. Allowing the writ petition, the High Court set aside the appellate order and held that the petitioner’s refund claims were not barred by limitation. The court remanded the matter back to the appellate authority for fresh adjudication on merits, in accordance with law and the observations made by the Court. Case Details Case Title: Bharat Oil Traders Versus Assistant Commissioner & anr. Case No.: WP(C) No. 192/2023 Date: 30.12.2025 Counsel For Petitioner: Sachin Sharma, Advocate Counsel For Respondent: Rohan Nanda, Advocate Click Here To Read Order Read More: Single Assessment Order For Several Tax Periods Violates S. 73, 74 of CGST Act: AP HC

GST Refund Limitation Can’t Be Curtailed Retrospectively: J&K HC Upholds Vested Right to Claim Inverted Duty Refund

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