Amendment to Rule 89(4)(C) of CGST Rules, restricting refund by capping 'export turnover,' not applicable retrospectively

Last updated: 12 October 2023

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Quick Summary

The Delhi High Court has ruled that the amendment to Rule 89(4)(C) of the CGST Rules, which restricted refunds by capping 'export turnover', cannot be applied retrospectively. The court found the amendment arbitrary and contrary to the CGST Act. Consequently, refund rejection orders based on this rule were set aside, and the revenue department was directed to process the refund claims for unutilised Input Tax Credit (ITC).

Court :
Delhi High Court

Brief :
The Hon'ble Delhi High Court in the case of M/s. Indian Herbal Store Pvt. Ltd. vs. Union of India[W.P.(C) 9908/2021 and W.P.(C) 9912/2021 dated September 15, 2023]allowed the writ petition and held that the Rule 89(4)(C) of the Central Goods and Services Rules, 2017 ("the CGST Rules") would not have any retrospective application. The Hon'ble High Court while relying upon the judgment of the Hon'ble Karnataka High Court in M/s.Tonbo Imaging India Pvt. Ltd. vs. Union of India and Others [W.P.(C) No. 13185/2020 dated February 16, 2023], noted that Hon'ble Karnataka High Court has already struck down the substitution made in Rule 89(4)(C), being arbitrary and ultra vires in nature and contrary to provisions of Section 54 of the Central Goods and Services Tax Act ("the CGST Act"). Therefore, the Hon'ble High Court set aside the Refund Rejection Order and Order-In-Appeal and directed the Revenue Department to process the claim for Refund of unutilized Input Tax Credit ("ITC").

Citation :
W.P.(C) 9908/2021 and W.P.(C) 9912/2021 dated September 15, 2023

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