GST refund claims for accumulated ITC under inverted duty, pre-2019 amendment filing deadline upheld; rejections set aside, remanded

The dominant issue was whether the amendment effective 01.02.2019 curtailing the period for filing GST refund applications could retrospectively defeat a taxpayer's vested right to claim refund of accumulated ITC under an inverted duty structure for periods prior to the amendment. The HC held that substantive amendments are presumed prospective unless expressly retrospective, and a vested refund right cannot be divested by later curtailment; accordingly, the unamended "relevant date" governed pre-amendment periods and the claims for July 2017-December 2018 and January-March 2019 were not time-barred. The HC further found the rejection for January-March 2019 for alleged non-receipt of eligible inputs lacked a reasoned finding. The impugned order was set aside and the matter remanded for fresh determination.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the amendment effective 01.02.2019 substituting the definition of "relevant date" for refund of unutilised input tax credit under inverted tax structure could be applied retrospectively so as to curtail the limitation period for refund claims relating to periods prior to the amendment.

(ii) Whether, after exclusion of the period 01.03.2020 to 28.02.2022 for computation of limitation for refund applications under Section 54, the refund application filed on 02.02.2021 was within limitation for the tax periods July 2017 to March 2019.

(iii) Whether rejection of the refund claim for January 2019 to March 2019 on the asserted ground of "no eligible inputs" could be sustained in the absence of a reasoned finding.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Retrospective application of amended "relevant date" and impact on vested right

Legal framework: The Court examined Section 54(1) and Section 54(3)(ii) governing refund of unutilised input tax credit in an inverted tax structure, and the definition of "relevant date" in Explanation (2)(e), which was substituted with effect from 01.02.2019 from "end of the financial year" to "due date for furnishing the return under Section 39 for the period in which such claim arises."

Interpretation and reasoning: The Court framed the determinative question as whether the amendment curtailing the period for filing refund claims could be applied to periods preceding 01.02.2019 so as to divest or curtail a right that had already accrued. The Court held that the right to claim refund for the pre-amendment period could not be curtailed by a subsequent amendment unless the amendment expressly provided for retrospective operation. The Court treated the curtailment of the limitation window, when applied to an accrued entitlement, as impermissible retrospective deprivation of a vested right, and applied the presumption that such substantive curtailment operates prospectively absent express retrospective intent.

Conclusion: The amended definition of "relevant date" effective 01.02.2019 could not be applied retrospectively to refund claims relating to periods prior to 01.02.2019 so as to shorten the time available; the unamended definition continued to govern those pre-amendment periods.

Issue (ii): Limitation for the refund application dated 02.02.2021 in light of exclusion of time from 01.03.2020 to 28.02.2022

Legal framework: The Court applied the notification excluding the period from 01.03.2020 to 28.02.2022 for computation of limitation for filing refund applications under Section 54, and noted that the exclusion was deemed effective from 01.03.2020.

Interpretation and reasoning: The Court accepted that, applying the exclusion period, refund claims for February 2018 to December 2018 were within limitation. For July 2017 to January 2018, the Court held that since the unamended "relevant date" applied, the limitation would have otherwise run up to March 2020; because the limitation endpoint fell within the excluded period commencing 01.03.2020, the exclusion protected the claim and the application dated 02.02.2021 could not be rejected as time-barred. The Court further held that the refund claim for January 2019 to March 2019 was also not barred by limitation under Section 54, and that the claim could not be rejected solely on "technical grounds of delay" in the circumstances considered.

Conclusion: The refund application dated 02.02.2021 was held not barred by limitation for the periods July 2017 to December 2018, and the Court also held that the claim for January 2019 to March 2019 was not barred by limitation.

Issue (iii): Validity of rejection for January 2019 to March 2019 on the ground of "no eligible inputs"

Interpretation and reasoning: The Court noted that the claim for January 2019 to March 2019 had been rejected on the basis that no eligible inputs were received, but found that no reasoned finding supporting that conclusion had been recorded. In the absence of a reasoned determination, the Court held that the rejection could not be sustained in its existing form and required reconsideration.

Conclusion: The rejection for January 2019 to March 2019 was not upheld; the matter required a fresh determination with a reasoned decision.

Final disposition tied to the decided issues: The Court set aside the impugned appellate order and remanded the matter for fresh determination in accordance with the Court's conclusions on (a) non-retrospective operation of the amended "relevant date," (b) applicability of the excluded period for limitation computation, and (c) necessity of a reasoned finding on the "eligible inputs" ground.

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