The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad, has held that a refund claim relating to input tax credit accumulated before July 18, 2022 cannot be rejected solely because the refund application was filed after that date.

Allowing an appeal concerning a ₹61.47 lakh inverted duty structure refund, the bench of Sushil Kumar Sharma (Judicial Member) and Duvvuri Krishna Srinivas (Technical Member) set aside the orders of the original adjudicating authority and the first appellate authority. It directed the original authority to reconsider the claim in accordance with law and applicable judicial precedents.

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The Bench found that the rejection rested on a restriction in a CBIC circular which had been struck down, to the relevant extent, by several High Courts.

The appellant, an edible oil manufacturer, claimed that input tax credit had accumulated because certain raw materials and other inputs attracted GST at rates higher than those applicable to its outward supplies.

The dispute concerned the period from May 1, 2020 to March 31, 2021.

An initial refund application seeking approximately ₹65.05 lakh was filed on June 18, 2022, and acknowledged on June 30, 2022. However, that application was subsequently withdrawn on July 25, 2022.

The manufacturer filed a fresh application on March 25, 2023, seeking a refund of ₹61,47,671 for the same period. The fresh application was acknowledged on April 6, 2023.

After issuing a show cause notice and considering the manufacturer’s reply, the adjudicating authority rejected the claim on May 23, 2023. The first appellate authority subsequently upheld the rejection.

The departmental authorities relied on Notification No. 09/2022–Central Tax (Rate), dated July 13, 2022, and CBIC Circular No. 181/13/2022-GST, dated November 10, 2022.

The notification, effective from July 18, 2022, restricted inverted duty structure refunds for specified goods falling under Chapters 15 and 27.

The circular stated that the restriction would apply to refund applications filed on or after July 18, 2022, while applications filed before that date would remain outside its scope.

The department argued that the application under adjudication was the fresh application filed on March 25, 2023. Since the earlier application had been withdrawn, the manufacturer could not rely on its original filing date.

It further submitted that Section 54 prescribed a limitation period for seeking refunds but did not confer an unconditional entitlement irrespective of the restrictions imposed under the GST framework.

The manufacturer contended that the refund concerned credit accumulated during May 2020 to March 2021, well before the notification became effective.

It argued that a prospective restriction could not be applied to such earlier credit merely because the refund application was submitted later.

The manufacturer also relied on judicial decisions examining the validity of the circular’s application-based cutoff. Its case was that the date of filing, by itself, could not determine eligibility for a refund of credit accumulated before July 18, 2022.

The Tribunal placed substantial reliance on the Andhra Pradesh High Court’s decision in Gemini Edibles and Fats India Limited v. Assistant Commissioner of Central Tax, decided on January 29, 2025.

As discussed in the GSTAT order, the High Court held that the notification’s prospective operation protected the ability to seek a refund of qualifying credit accumulated before July 18, 2022, through an application under Section 54.

The High Court had struck down the circular to the extent that it applied the notification’s restriction to all refund applications filed on or after July 18, 2022.

The Tribunal recorded that the Revenue’s special leave petitions against that judgment were dismissed by the Supreme Court on May 9, 2025.

It also referred to decisions of the Gujarat, Rajasthan, Allahabad and Calcutta High Courts taking a similar view on the issue.

Discussing the Gujarat High Court’s ruling in Patanjali Foods Ltd. v. Union of India, the Tribunal noted that the filing-date restriction had been found to create an artificial distinction between taxpayers based on when their refund applications were submitted.

The Tribunal observed that the notification itself did not prescribe a filing-date restriction extinguishing refund claims relating to credit accumulated before its commencement.

It found that the circular had been used to deny claims filed after July 18, 2022 even where the underlying credit related to an earlier period.

The Bench reasoned that an accrued ITC right could not be curtailed through an interpretation of an executive circular that effectively gave the restriction retrospective operation without statutory or legal backing.

In the present case, the Tribunal found that the lower authorities’ rejection was based solely on the disputed restriction in the circular. Since that restriction had been struck down by various High Courts, the impugned orders could not be sustained.

The Tribunal also recorded its conclusion that the second refund application was within the applicable statutory limitation period.

The department referred to a proposed or contemplated review concerning the Supreme Court’s dismissal of its challenge in the Gemini Edibles matter.

However, the Tribunal noted that no documentary evidence concerning the filing of a review or appeal had been produced before it.

It therefore proceeded to decide the appeal by following the judicial decisions discussed in its order.

The Tribunal allowed the appeal and set aside both the original refund rejection and the first appellate order.

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