TaxTMI 
TaxTMI 
28 Sep 2026 
A statutory formula intended to quantify a tax benefit must measure that benefit fairly. When the formula produces an unintended shortfall and is subsequently corrected, a fundamental question arises: does the correction apply only prospectively, or does it also extend to earlier claims that remain within the statutory limitation period?
The decision in Ajit Kumar Minz Versus M/s B.L. Agro Industries Limited, Director. - 2026 (9) TMI 1479 - GSTAT LUCKNOW addresses this question in the context of the amended formula for refund of accumulated input tax credit under Rule 89(5) of the CGST Rules, 2017. The ruling treats the amendment introduced 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 prescribed under Section 54(1) of the CGST Act, 2017.
The decision also addresses three connected questions of wider significance: whether a supplementary refund claim can be filed for an amount omitted from an earlier application; whether a later notification restricting refunds for specified goods can affect ITC accumulated during earlier periods; and whether procedural errors in the refund annexure justify rejection of the entire claim.
Five Refund Claims Caught Between an Old Formula and a Curative Amendment
M/S B.L. Agro Industries Limited manufactured and supplied edible oils falling under Chapter 15 of the Customs Tariff Act, 1975. Its business generated accumulated ITC due to an inverted duty structure, and it claimed a refund under Section 54(3)(ii) of the CGST Act, 2017 read with Rule 89(5) of the CGST Rules, 2017.
The dispute concerned five claims aggregating to Rs.5.71 crore for October 2019, December 2019, January 2020, July-August 2020 and September 2020. The claims initially faced a procedural obstacle. The Proper Officer issued deficiency memos because the applications 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 officer to consider the manual claims on their merits, after following the principles of natural justice.
The taxpayer thereafter re-filed the claims on the portal under the category "on account of Order-in-Appeal." By then, Notification No. 14/2022-Central Tax had amended the formula under Rule 89(5). The taxpayer applied the amended formula and sought the differential amount not available under the earlier computation.
The claims were again rejected. The Proper Officer treated the amendment as prospective, objected to supplementary claims for periods already covered by earlier applications, invoked the later restriction applicable to specified Chapter 15 goods, raised limitation and classification objections, and questioned entries made in the input-service annexure.
The First Appellate Authority set aside the rejection orders and directed the sanction of the refunds after arithmetical verification. The Department's five appeals against that decision brought the controversy before the Tribunal.
The Earlier Formula Understated the Refund
Rule 89(5) of the CGST Rules, 2017 prescribes the formula for determining the maximum refund of unutilised ITC accumulated because the tax rate on inputs exceeds the rate on output supplies. The earlier formula calculated the proportionate Net ITC attributable to inverted-rated supplies and then deducted the tax payable on those supplies. The difficulty was that "Net ITC" for this purpose covered ITC availed on inputs, whereas the output tax liability could be discharged using credit arising from both inputs and input services.
The formula could therefore deduct the entire output tax liability from a credit pool that recognised only input-goods credit. This mismatch could understate the refundable amount where input-service credit also contributed to payment of output tax.
Notification No. 14/2022-Central Tax modified the formula to account for the proportion of ITC attributable to inputs vis-a -vis the total ITC on inputs and input services. The amendment did not create the concept of inverted-duty refund or introduce a new class of eligible taxpayers. It altered the computation method to correct an anomaly in quantifying an existing statutory entitlement.
That distinction between creating a new right and correcting the measurement of an existing right became central to the question of retrospectivity.
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 & ALLIED INDUS. LTD. Versus COLLR. OF C. EX., AURANGABAD-1999 (4) TMI 79 - Supreme Court and COMMISSIONER OF CUS., BANGALORE Versus CENTRAL MANUFACTURING TECHNOLOGY INSTITUTE - 2001 (7) TMI 147 - KARNATAKA HIGH COURT. 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 05.07.2022 did 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 Ltd Versus Union of India & Ors. - 2024 (12) TMI 511 - GUJARAT HIGH COURT. 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 Messrs Shree Renuka Sugars Ltd. Versus State Of Gujarat - 2023 (7) TMI 938 - GUJARAT HIGH COURT. 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. The 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 Adjudication Must Separate Eligibility, Quantification and Procedure
The decision distinguishes the statutory right to refund under Section 54 from its quantification under Rule 89(5) and the procedure governing its verification. A curative amendment correcting the refund formula must be given meaningful effect, while procedural or annexure-related errors should be resolved through verification rather than outright rejection.
The Department may examine eligibility, limitation, quantum and possible duplication. It cannot, however, preserve a corrected anomaly, retrospectively apply a later restriction or deny a substantive refund merely because of limitations in the portal or supporting documentation.
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