Raj Jaggi
A statutory formula meant to calculate a tax benefit should determine that benefit fairly and correctly. If the formula results in an unintended shortfall and is later corrected, an important question arises: should the corrected formula apply only from the date of amendment, or should it also apply to earlier claims still within the statutory limitation period?
The GST Appellate Tribunal has examined this issue in Ajit Kumar Minz v. M/s B.L. Agro Industries Limited, 2026-VIL-109-GSTAT-LCK, dated 17.09.2026, in the context of the amended formula for refund of accumulated input tax credit under Rule 89(5) of the CGST Rules, 2017. The Tribunal has treated the amendment made by Notification No. 14/2022-Central Tax dated 05.07.2022 as curative and clarificatory, and therefore applicable retrospectively to eligible refund or rectification applications filed within the limitation period prescribed under Section 54(1) of the CGST Act, 2017.
The decision also addresses three related issues of wider importance: whether a supplementary refund claim can be made for an amount omitted from an earlier application; whether a subsequent notification restricting refunds for specified goods can affect ITC accumulated during earlier periods; and whether procedural mistakes in the refund annexure can justify rejection of the entire refund claim.
Five Refund Claims and the Amended Rule 89(5) Formula
M/s B.L. Agro Industries Limited manufactured and supplied edible oils falling under Chapter 15 of the Customs Tariff Act, 1975. Due to the inverted duty structure, input tax credit accumulated with the company, for which it claimed refund under Section 54(3)(ii) of the CGST Act, 2017 read with Rule 89(5) of the CGST Rules, 2017.
The dispute related to five refund claims aggregating to Rs. 5.71 crore for October 2019, December 2019, January 2020, July-August 2020 and September 2020. Initially, the claims faced a procedural difficulty because they had been filed manually instead of electronically in Form GST RFD-01 on the common portal. In the first round of appeals, the First Appellate Authority directed the Proper Officer t o consider the manual claims on merits after following the principles of natural justice.
The taxpayer thereafter re-filed the refund applications on the portal under the category “on account of Order-in-Appeal.” By that time, Notification No. 14/2022-Central Tax dated 05.07.2022 had amended the refund formula under Rule 89(5) of the CGST Rules, 2017. The taxpayer applied the amended formula and claimed the additional refund that was not available under the earlier formula.
The Proper Officer again rejected the claims on several grounds. The amendment to Rule 89(5) was treated as prospective; supplementary refund claims for periods already covered by earlier applications were questioned; a subsequent restriction relating to specified Chapter 15 goods was invoked; and objections were also raised regarding limitation, classification and certain entries in the input-service annexure.
The First Appellate Authority set aside the rejection orders and directed sanction of the refunds, subject to arithmetical verification. The Department challenged these orders by filing five appeals before the GST Appellate Tribunal, bringing the entire dispute before the Tribunal.
Why the Earlier Formula Could Reduce the Refund
Rule 89(5) of the CGST Rules, 2017 provides the formula for calculating a refund of unutilised ITC accumulated because the tax rate on inputs exceeds the tax rate on output supplies. Under the earlier formula, proportionate Net ITC relating to inverted-rated supplies was first calculated, and the tax payable on such supplies was then deducted from that amount.
The difficulty arose because “Net ITC” included only ITC on inputs, whereas the output tax liability could be discharged by using ITC available on both inputs and input services. Thus, the formula deducted the entire output tax liability, even though, for calculating the refundable amount, it recognised only ITC relating to inputs. This mismatch could reduce the refund where input-service credit had also been used to pay output tax.
Notification No. 14/2022-Central Tax dated 05.07.2022 amended the formula to take into account the proportion of ITC on inputs in relation to the total ITC on inputs and input services. The amendment did not create a new right to refund or extend the benefit to a new category of taxpayers. It only changed the method of calculation to remove the anomaly in determining the amount of an existing refund entitlement.
This distinction became important before the Tribunal: did the amendment create a new benefit, or did it merely correct the method of calculating an already existing benefit? The answer to this question was central to deciding whether the amended formula could apply retrospectively.
Curative Amendments Are Defined by Their Purpose
Tax amendments are ordinarily presumed to operate prospectively unless the legislature expressly or by necessary implication provides otherwise. That principle, however, does not end the inquiry. Courts have consistently recognised that an amendment intended to explain an existing provision, remove an obvious anomaly, or cure an unintended defect may operate retrospectively.The true character of the amendment depends on its substance and purpose, not merely on the absence of the word “retrospective” in the notification.
The Tribunal relied on the principles emerging from Belapur Sugar & AlliedIndustries Ltd. v. Collector of Central Excise, 1999 (108) E.L.T. 9 (S.C.) - 1999-VIL-102-SC-CE and Commissioner of Customs, Bangalore v. Central Manufacturing Technology Institute, 2002 (142) E.L.T. 336 (Kar.). These decisions support retrospective operation where an amendment advances the object of the original provision or clarifies and corrects the earlier legal position.
Notification No. 14/2022-Central Tax dated 05.07.2022did not establish a new refund mechanism. Section 54(3)(ii) had already recognised the right to claim a refund of ITC accumulated because of an inverted duty structure. Rule 89(5) merely supplied the machinery for quantifying that refund. The amendment repaired the machinery so that the computation better reflected the statutory entitlement.
Treating such a correction as exclusively prospective would preserve the acknowledged anomaly for earlier claims, even where those claims remained alive and within limitation. It would divide otherwise similarly placed taxpayers solely by reference to the date on which the computational defect was corrected.The curative character of the amendment therefore supported its application to earlier tax periods, provided the refund or rectification application satisfied the limitation and substantive requirements of Section 54 of the CGST Act, 2017.
Ascent Meditech Anchors Retrospective Application
The most direct authority was the Gujarat High Court’s decision in Ascent Meditech Limited v. Union of India, n 2025 (93) G.S.T.L. 85 (Guj.) - 2024-VIL-1273-GUJ. The Gujarat High Court examined the amended Rule 89(5) formula and held that Notification No. 14/2022-Central Tax was curative and clarificatory. It applied the corrected formula retrospectively to refund or rectification applications filed within the two-year period prescribed under Section 54(1).The High Court also quashed Circular No. 181/13/2022-GST to the extent it characterised the amendment as non-clarificatory. An administrative circular could not alter the amendment's legal character or restrict the operation of a statutory provision as judicially interpreted.
The Supreme Court dismissed the Department’s special leave petition against Ascent Meditech on 28.03.2025. A non-speaking dismissal of an SLP does not independently declare law under Article 141 or merge the High Court’s decision into a Supreme Court judgment. Nevertheless, the Gujarat High Court ruling remained undisturbed and provided direct judicial authority on the precise issue.
The Tribunal adopted that reasoning and treated the amended formula as applicable retrospectively to eligible refund claims relating to earlier periods.
Even the Circular’s Application-Date Test Supported the Claims
The taxpayer’s case rested on an additional and independent foundation. Circular No. 181/13/2022-GST stated that the amended formula would apply to refund applications filed on or after 05.07.2022, while applications filed before that date would be dealt with under the earlier formula.All five operative refund applications in the present proceedings were filed after 05.07.2022. Thus, even if the Circular’s assertion that the amendment was prospective were accepted, its application-date test supported applying the amended formula.
The Department attempted to focus on the earlier tax periods for which credit had accumulated. The Circular, however, framed its clarification by reference to the date of filing the refund application rather than the tax period to which the claim related.
The ruling therefore rests on two routes leading to the same result. First, the amendment was curative and applicable retrospectively under Ascent Meditech. Second, the applications were filed after the amendment and consequently fell within the Circular’s own stated field of application.This dual foundation makes the decision particularly significant. The claims did not depend entirely on rejecting the Circular; they qualified even under the Circular’s application-date formulation.
A Circular Cannot Narrow a Statutory Refund
The case reinforces the settled hierarchy between legislation and administrative instructions. Circulars may clarify departmental practice and guide officers, but they cannot override the Act or Rules, add restrictions not found in the legislation, or take away a benefit conferred by the statute.
The First Appellate Authority relied on Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries, where the Supreme Court held that a circular contrary to statutory provisions has no legal force. Courts and quasi-judicial authorities must apply the statute rather than an inconsistent departmental instruction.
This principle is especially important in refund matters. Refund provisions undoubtedly require strict compliance with eligibility, limitation, and evidentiary conditions. But strict compliance does not permit the administration to introduce an additional substantive restriction through a circular.Once Notification No. 14/2022-Central Tax was judicially recognised as curative, Circular No. 181/13/2022-GST could not preserve the very defect the amendment intended to remove. The circular had to yield to the statutory provision and its authoritative interpretation.
Supplementary Claims Are Not Barred Merely Because an Earlier Claim Was Filed
The Department also argued that the taxpayer had already filed refund applications for the relevant periods and could not submit further claims for differential amounts.Neither Section 54 nor Rule 89 contains an express prohibition on filing a supplementary claim for an amount inadvertently omitted from an earlier application. The real safeguards are limitation, substantive eligibility, verification of the claimed amount, and prevention of duplicate refunds.
The respondent relied on Renuka Sugar Limited, (2023 (78) GSTL, 324 - 2023-VIL-439-GUJ. In that case, the claimant sought a lower refund due to an inadvertent arithmetical error. When it attempted to claim the omitted amount, the portal did not permit another application under the same category for the same period. The Gujarat High Court refused to allow a technological limitation to defeat a substantive claim and permitted consideration of the supplementary application.
The same principle applies to B.L. Agro Industries' differential claims. The taxpayer did not seek double reimbursement of an amount already sanctioned. It sought the additional amount allegedly becoming refundable when the corrected formula was applied.
A supplementary claim does not become valid merely because it is described as differential. The claimant must establish that the amount was not previously refunded, that the underlying ITC is eligible, and that the claim is within limitation. Once these safeguards are satisfied, rejecting the claim solely because an earlier application was filed elevates procedure over substantive entitlement.
A Later Chapter 15 Restriction Cannot Rewrite Earlier Tax Periods
Notification No. 09/2022-Central Tax (Rate), effective from 18.07.2022 , restricted the refund of accumulated ITC for specified goods falling under Chapters 15 and 27. Since the respondent manufactured edible oils falling under Chapter 15, the Department invoked this notification against the claims.
However, the accumulated ITC related to tax periods between October 2019 and September 2020, which preceded the notification by nearly two years.A restriction brought into force from a specified date ordinarily operates from that date unless retrospective effect is expressly or necessarily provided. T he later date on which an application is filed does not, by itself, transform earlier accumulated credit into credit arising after the restriction.
The legal question must be examined with reference to the tax periods during which the ITC accumulated and the law governing entitlement for those periods. An administrative circular cannot extend a prospective notification backwards and extinguish an otherwise available refund. Therefore, the fact that the claims were re-filed after 18.07.2022 was insufficient to attract the later restriction to ITC accumulated during 2019 and 2020.
Annexure Errors Call for Verification, Not Wholesale Rejection
Certain items were shown in the input-service annexure even though they were allegedly goods rather than services. The Department treated this classification error as an additional ground for rejecting the claims and alleged that it had already considered the related credit in earlier refunds.
The ruling favours a verification-based approach. If an item has been entered under the wrong annexure, the officer should examine the invoice, correctly classify the supply, and determine its effect on the statutory formula. If the credit has already been refunded, exclude it to prevent duplication. If it remains eligible and unrefunded, the claim should not fail merely because it appeared under an incorrect column.
This approach does not dilute verification. It requires closer verification focused on the correct question: whether the credit is eligible and whether the amount has already been refunded. A clerical or classificatory error in supporting documentation cannot substitute for that substantive examination.
COVID Limitation Exclusion Must Be Given Full Effect
The Department correctly argued that filing within limitation does not automatically establish refund eligibility. A timely claim may still fail if the credit is inadmissible, the statutory formula is not satisfied, or the amount has already been refunded.That proposition, however, could not support the separate contention that the five claims were time-barred.
Notification No. 13/2022-Central Tax excluded the period from 01.03.2020 to 28.02.2022 while computing the limitation period for refund claims under Section 54. The exclusion was introduced to neutralise the impact of COVID-19 disruptions on statutory timelines.After giving effect to the notified exclusion and considering the procedural history of the claims, the First Appellate Authority found the applications to be within time. The Tribunal found no sufficient reason to disturb that conclusion.
Limitation had to be calculated under the statutory framework as modified by the notification. The Department could not invoke the ordinary passage of time while disregarding the period that the Government had expressly directed to be excluded.
Refund Claims Require Proper Verification, Not Mechanical Rejection
The decision draws an important distinction between the right to refund under Section 54, calculation of the refund under Rule 89(5), and the procedure for claiming and verifying it. Where an amendment corrects a defect in the refund formula, it should be given proper effect. Similarly, procedural mistakes or errors in the refund annexure should ordinarily be examined and corrected through verification rather than becoming a ground for rejection of the entire claim.
The Department is entitled to verify the taxpayer’s eligibility, limitation, amount of refund and any possibility of duplicate claim. However, an otherwise admissible refund should not be denied merely because of portal limitations or procedural defects. Nor can a later restriction be applied retrospectively to deny a refund relating to an earlier period when no such restriction was then applicable.
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