Refund Claims for ITC Accrued Before July 18, 2022 Cannot Be Denied Solely Based on Filing Date: Supreme Court Upholds Andhra Pradesh HC Verdict
In a major relief to taxpayers, the Supreme Court of India has upheld a key ruling by the Andhra Pradesh High Court. The decision confirms that Input Tax Credit (ITC) refunds for periods before July 18, 2022, cannot be rejected merely because the refund applications were filed after that date.
This ruling reinforces that GST notifications apply prospectively, not retrospectively. Consequently, taxpayers retain the right to claim refunds for ITC accrued before the effective date of a new notification.
🏛️ Background of the Case
The case involved Gemini Edibles and Fats India Ltd., a manufacturer of edible oils and specialty fats. The company operated under an Inverted Duty Structure (IDS). In such cases, input taxes are higher than output taxes, resulting in unutilized ITC.
To recover this ITC, the company filed refund applications under Section 54 of the CGST Act, 2017. These applications related to periods prior to July 18, 2022.
However, the tax authorities rejected the claims, citing Notification No. 9/2022-Central Tax (Rate) dated July 13, 2022. This notification included certain goods—like edible oils and specialty fats—in the list of ineligible items for ITC refunds, effective from July 18, 2022.
The authorities argued that refund claims submitted after this date, even for earlier periods, stood barred. This formed the crux of the legal challenge.
⚖️ Andhra Pradesh High Court’s Ruling
The Andhra Pradesh High Court, in a ruling dated January 29, 2025, rejected the tax department’s reasoning.
The Court emphasized three key points:
- Section 54(3) of the CGST Act permits refund of ITC where input tax exceeds output tax, subject to a government notification restricting certain goods.
- Notification No. 9/2022 was intended to apply only from July 18, 2022, and not retroactively.
- Circular No. 181/13/2022-GST, which interpreted the notification to restrict refunds for all applications filed post-July 18, 2022—regardless of when ITC accrued—was illogical and contrary to law.
The Court ordered that the rejected refund applications be reconsidered, and that the Circular be set aside to the extent it imposed a retrospective restriction.
🏛️ Supreme Court’s Final Decision
The Supreme Court, in SLP Appeal (C) Nos. 12495-12498 of 2025, dismissed the Special Leave Petition filed by the Assistant Commissioner of Central Taxes. This effectively upheld the High Court’s verdict.
The top court found no merit in the department’s claim that refund eligibility depended on the filing date. The Court confirmed that ITC accrued before July 18, 2022 remains eligible for refund under Section 54, regardless of when the refund is applied for.
📌 Key Takeaways for Taxpayers
✅ Prospective Enforcement Only
GST notifications like Notification No. 9/2022 apply only from the date they take effect. They cannot deny taxpayers benefits they were entitled to before the notification came into force.
✅ Refund Eligibility Based on Accrual Date
Refunds are linked to when the ITC accrued, not when the application was submitted.
✅ Rejection Orders Set Aside
Tax authorities must reconsider refund applications filed after July 18, 2022, if the ITC was earned before that date.
📢 What This Means for Taxpayers
This ruling is a significant win for taxpayers in sectors with inverted duty structures, such as:
- Edible oils
- Specialty fats
- Textiles
- Fertilizers
It clarifies that tax authorities cannot arbitrarily deny refunds for past entitlements. Moreover, it highlights the importance of understanding effective dates of notifications before interpreting their scope.
If you’re a registered taxpayer who earned ITC before July 18, 2022—but filed for refund afterward—you may be entitled to relief. Refunds previously denied under the now-invalid interpretation can now be reconsidered.
🧾 Action Points for Businesses
- Review all refund rejections involving ITC earned before July 18, 2022.
- File an appeal or request reconsideration if your claim was denied based on the notification or circular.
- Consult your tax advisor to ensure proper documentation and eligibility.
