GST Refund Is A Vested Right, Not Curtailed By Retrospective 2019 Amendment: J&K And Ladakh HC
Isabella Mariam
The High Court of Jammu & Kashmir and Ladakh Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem has set aside a tax appellate order rejecting a registered partnership firm’s GST refund claims for unutilised input tax credit arising from an inverted tax structure and sent the matter back to the appellate authority for fresh consideration. The dispute concerned whether a 2019 change to the GST law, which altered the starting point for calculating the two-year limitation for refund applications, could be used to treat claims relating to periods before 1 February 2019 as time-barred. The Bench found that the amended limitation trigger cannot be applied retrospectively to defeat refund rights that had already accrued and noted that rejection of part of the claim on “ineligible inputs” lacked a reasoned finding.
The writ petition was filed by a partnership firm engaged in refilling and sale of edible oil and ghee, registered under the State and Central Goods and Services Tax Acts, 2017. The firm claimed refund of accumulated input tax credit arising from an inverted duty structure, where the tax rate on inputs exceeded the rate on outward supplies. The refund claims pertained to the period from July 2017 to March 2019.
The refund application was filed on 02.02.2021 and was rejected by the tax authorities on the ground of limitation. Part of the claim, relating to January 2019 to March 2019, was also rejected on the ground that no eligible inputs were received. The appellate authority upheld the rejection without considering the benefit of the pandemic-related exclusion of limitation. The petitioner contended that the amendment to Section 54 of the CGST Act effective from 01.02.2019 could not retrospectively curtail an accrued right to claim refund and that the limitation period stood extended in view of statutory notifications excluding the COVID-19 period.
The Court examined the scheme of Section 54 of the CGST Act and the definition of “relevant date” before and after 01.02.2019. It recorded that “the right to claim refund with respect to period preceding the amendment cannot be curtailed by the amendment” and that “the amended Section cannot operate retrospectively so as to take away a vested right.”
The Bench stated that “every statute is presumed to operate prospectively unless the same is expressly made retrospective” and that substantive amendments curtailing taxpayer rights cannot apply to accrued claims unless clearly provided. Referring to precedent, the Court noted that “a shorter period of limitation provided by a later amendment cannot extinguish a vested right of action.”
On limitation, the Court observed that “the refund application filed on 02.02.2021 in so far concerns the period of February 2018 to December 2018 is within the permissible time limit and not barred by limitation” in view of the notification excluding the period from 01.03.2020 to 28.02.2022.
With respect to July 2017 to January 2018, the Court recorded that “the un-amended definition of ‘relevant date’ would continue to apply” and that the claim, whose limitation expired in March 2020, was entitled to the benefit of the exclusion period.
Regarding the rejection of the claim for January 2019 to March 2019, the Court noted that “no reasoned finding in this regard has been given” and that the claim could not be rejected solely on technical grounds.
The Court directed that “this petition is allowed.” and “the impugned order dated 30.09.2022 is set aside. The matter is remanded back to respondent No. 2 for fresh determination in light of aforesaid observations and in accordance with law.”
Advocates Representing the Parties
For the Petitioners: Mr. Sachin Sharma, Advocate
For the Respondents: Mr. Rohan Nanda, Advocate
Case Title: Bharat Oil Traders v. Assistant Commissioner & Anr.
Case Number: WP(C) No. 192 of 2023
Bench: Justice Sindhu Sharma, Justice Shahzad Ajeem
