Accumulated input tax credit refund cannot be restricted by a circular where the governing legal principle already applies.

Refund of accumulated input tax credit under Section 54(3) of the KGST Act, 2017 was addressed with reference to Rule 89(5) and Circular No. 135/05/2020-GST. The Court treated an earlier decision on the same legal principle as governing the present facts, where the grievance was that refund had been limited to the tax on the principal input despite the use of other inputs and ingredients in manufacturing. On that basis, the circular-based restriction was not accepted as a valid ground to deny or limit the refund claim, and the refund limitation tied to the principal input was not sustained.

---

---

Issues: Whether the refund of accumulated input tax credit could be restricted by reference to the tax rate on the principal input and whether Circular No. 135/05/2020-GST could be applied to deny or limit such refund under Section 54(3) of the KGST Act, 2017 read with Rule 89(5) of the KGST Rules, 2017.

Analysis: The relief sought turned on the same legal principle already decided in the earlier decision relied upon by the petitioner. The grievance was that the refund had been confined to the tax on the principal input, although the manufacturing activity involved other inputs and ingredients as well. The Court accepted that there was no dispute regarding the applicability of the earlier decision to the present facts and treated that legal position as governing the petitions. On that basis, the circular-based restriction was not accepted as a ground to deny the refund claim.

Conclusion: The issue was answered in favour of the assessee, and the refund limitation based on the principal input was not sustained.

Final Conclusion: The writ petitions challenging the revision orders were allowed, the impugned orders were quashed, and the connected petitions were disposed of consequentially.

Ratio Decidendi: Refund of accumulated input tax credit under Section 54(3) of the KGST Act, 2017 cannot be denied or restricted by an administrative circular where the legal principle governing the entitlement has already been held applicable on the facts.

---