Filed ITC Refund After 18.07.2022? Supreme Court Says You’re Still Eligible

An expected hurdle arises for an assessee company that found its refund claims for unutilized Input Tax Credit (ITC) denied. The claims were denied because they were submitted after July 18, 2022. The tax department used Notification No. 9/2022 and Circular No. 181/13/2022 to deny the refunds, even though the ITC applied to periods prior to the specified date. The HC adjudicated in favor of the assessee while deciding whether policy changes could affect vested rights retroactively. The department filed Special Leave Petitions before the Supreme Court following the High Court’s decision.

Main Issue before the Courts: Whether refund claims for ITC accumulated before July 18, 2022, under the inverted duty structure can be denied solely because the claim was filed after that date.

SC Held: The Supreme Court, while dismissing the Revenue’s SLPs, upheld the High Court’s interpretation and reasoning. It affirmed that Notification No. 9/2022 was prospective in nature and could not retrospectively affect ITC that had already accrued before July 18, 2022. The Court emphasised that the right to claim a refund under Section 54 of the CGST Act cannot be curtailed by a circular or notification applied retroactively. Thus, Circular No. 181/13/2022-GST, to the extent it restricted refunds of past ITC, was held to be inapplicable. The Court clarified that a refund cannot be denied merely because the application was filed after the notification date if the ITC itself had accrued earlier. Hence, the SLPs were disposed of in favor of the assessee.