Refund claim for ITC accrued before July 18, 2022 cannot be denied

The Supreme Court has dismissed a Special Leave Petition, upholding a High Court ruling that refund claims for Input Tax Credit (ITC) accrued before July 18, 2022, cannot be denied simply because they were filed after that date. The court found that a relevant notification restricting such claims applied prospectively. Consequently, refund rejections based on a subsequent circular were set aside, and applications are to be reconsidered.

The Hon'ble Supreme Court in the case of Assistant Commissioner of Central Taxes v. Gemini Edibles and Fats India Ltd. [SLP Appeal (C) Nos. 12495-12498 of 2025 dated May 09, 2025], dismissed the Special Leave Petition ("SLP") against the Hon'ble Andhra Pradesh High Court ruling where refund claims for Input Tax Claimed ("ITC") accrued before July 18, 2022 could not be denied solely because they were filed after said date, as Notification No. 9/2022-Central Tax (Rate) dated July 13, 2022("the Impugned Notification") applies prospectively. Thus, Circular No. 181/13/2022-GST dated November 10, 2022("the Impugned Circular") rejecting refund was to be struck down to that extent, and refund rejection orders were to be set aside.

Gemini Edibles and Fats India Limited ("the Petitioner") wasengaged in the business of manufacturing, distributing and branding of edible oils and specialty fats in India. In the process of the manufacture of these products, the Petitioner had sourced various raw materials on which GST had already been paid. It was so transpired that the rate of GST that was payable on edible oils and specialty fats was lower than the rate of tax levied on the inputs or raw materials sourced by the Petitioner.

The Petitioners, on the ground that their products fall under the category of Inverted Duty Structure ("ISD"), had filed applications for refund of the ITC, under Section 54 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") for the periods prior to July 18, 2022. These applications were rejected in various writ petitions.

Though, the general scheme of Section 54 of the CGST Act, provided for refund of such, ITC in cash, certain products were deemed ineligible for such benefit. The Central Government, from time to time, has been issuing notifications listing out the products which are ineligible for the benefit of Section 54 of CGST Act. One such notification issued by the Central Government is Notification No. 5/2017-Central Tax (Rate) dated June 28, 2017. Subsequently, the Impugned Notification was issued.

In the Impugned Notification, the Government included various types of edible oils and specialty fats. By such inclusion, the manufacturers/sellers of such products become ineligible for grant of refund, under Section 54 of the CGST Act.

Resultantly, the Petitioners had become ineligible for grant of refund, under Section 54 of the CGST Act, from July 18, 2022 onwards, on account of the Impugned Circular interpreting the Impugned Notification in a particular manner.

Hence, aggrieved by the Impugned Notification, as well as the Impugned Circular, the Petitioners filed the present writ petition challenging the Impugned Notification.

The Hon'ble Andhra Pradesh High Court in Writ Petition No. 12485/2024 held as under:

• Observed that, Section 54 of the CGST Act states that any person claiming refund of any tax and interest, if any, may make an application before the expiry of two years from the relevant date in such form as may be prescribed. As per Section 54(3) of the CGST Act, any registered person who is supplying any kind of goods would be entitled for refund of ITC once the rate of tax on inputs is higher than the rate of tax on the output supply made by him. However, the very same provision also stipulates that the Government, on the recommendations of the Council, can notify goods which would not be eligible for such refund.
• Noted that, in the present case, the Government, by Notification No. 5/2017 dated July 28, 2017, had initially set out a list of goods which would not be eligible for claiming refund under Section 54 of the CGST Act. Subsequently, this list was increased by inclusion of various other goods, by the Impugned Notification. The goods, so included, were various kinds of edible oils and specialty fats apart from coal, lignite etc. This Impugned Notification came into force on July 18, 2022, it would clearly mean that ITC which accumulates in the tax credit ledger of the registered person, on account of the mismatch between the input tax and the output tax, before July 18, 2022, can be recovered by the registered person, by way of an application under Section 54 of the CGST Act. This would not mean that, an application cannot be made after July 18, 2022. Restriction would apply only to the extent of ITC arising after July 18, 2022. In the Impugned Circular, while clarifying that the Impugned Notification is prospective, the Government went on to state that applications cannot be made after July 18, 2022. This Court found that the Impugned Circular is neither logical nor in accordance with the understanding of law in such cases.
• Held that, once a stipulation is made that the Impugned Notification, in question, operates from July 18, 2022, it would mean that any ITC which arose on account of the mismatch between the input tax and the output tax, prior to July 18, 2022, can always be recovered by the registered person, by making an application under Section 54 of the CGST Act. The Impugned Circular would have to be struck down, to the extent of the clarification that the restriction imposed by the Impugned Notification would be applicable in respect of all refund applications filed on or after July 18, 2022. Consequent to this, the Impugned Orders of rejection of refund, are set aside and the Impugned Refund Application shall be reconsidered, in terms of Section 54 of the CGST Act and without relying upon the Impugned Circular. Further, no view was clarified on the validity of the Impugned Notification. Hence, the writ petition was allowed.

Now, the Hon'ble Supreme Court of India in SLP Appeal (C) Nos. 12495-12498 of 2025, held that they are not inclined to interfere with the Andhra Pradesh High Court in Gemini Edibles and Fats India Limited v. The Assistant Commissioner of Central Taxes and Others[Writ Petition No. 12485/2024 dated January 29, 2025] ("Impugned Judgment"). Therefore, the present special leave petitions are dismissed. Any pending application(s) shall stand disposed of accordingly.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED