Limitation for GST refund claims depends on the refund category, and the 2019 amendment to input tax credit refunds is prospective.

Under Section 54 of the CGST Act, the relevant date for limitation depends on the category of refund claimed: refund of unutilised input tax credit is governed by Explanation 2(e), which links limitation to the due date for furnishing the return under Section 39, and cannot be treated like export refund under Explanation 2(a). The Delhi HC also held that the amended Explanation 2(e), effective from 1 February 2019, is prospective and cannot retrospectively curtail refund claims arising from earlier periods. Refund rejections as time-barred were set aside, and the applications were directed to be processed on merits in accordance with law.

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Issues: (i) What is the relevant date for computing the two-year limitation period for refund claims involving unutilised input tax credit and export-related refunds under Section 54 of the CGST Act, 2017? (ii) Whether the amended Explanation 2(e) to Section 54 of the CGST Act, 2017 applies retrospectively to refund claims relating to periods prior to 1 February 2019?

Issue (i): What is the relevant date for computing the two-year limitation period for refund claims involving unutilised input tax credit and export-related refunds under Section 54 of the CGST Act, 2017?

Analysis: The statutory scheme under Section 54 differentiates between refund of tax paid on exports and refund of unutilised input tax credit. Explanation 2(a) applies to refunds of tax paid in respect of exported goods and ties limitation to the date of loading and departure of the goods from India, whereas Explanation 2(e) is a special provision governing refund of unutilised input tax credit and links the relevant date to the due date for furnishing the return under Section 39 for the period in which the claim arises. The Court held that these clauses operate on different footings and cannot be conflated, because unutilised input tax credit refunds depend on return filing and credit accumulation, unlike simple export refunds.

Conclusion: For claims of unutilised input tax credit, the relevant date is governed by Explanation 2(e) and not Explanation 2(a); the refund claims were therefore to be tested on that basis.

Issue (ii): Whether the amended Explanation 2(e) to Section 54 of the CGST Act, 2017 applies retrospectively to refund claims relating to periods prior to 1 February 2019?

Analysis: The amendment to Explanation 2(e), effective from 1 February 2019, curtailed the earlier limitation reference from the end of the financial year to the due date for furnishing the return under Section 39, but the Court held that such amendment cannot retrospectively curtail a vested right already accrued under the unamended provision. The applicable law is the law in force when the relevant transaction or claim period arose, and a subsequent amendment cannot be used to defeat refund claims for earlier periods. The Court accepted the view that the amendment is prospective and that refund claims for pre-amendment periods continue to be governed by the unamended Explanation 2(e).

Conclusion: The amended Explanation 2(e) does not apply retrospectively to refund claims relating to periods prior to 1 February 2019; the unamended provision governs those claims.

Final Conclusion: The orders rejecting the refund claims as time-barred were set aside, and the refund applications were directed to be processed on merits in accordance with law.

Ratio Decidendi: In refund matters under Section 54 of the CGST Act, 2017, the relevant date must be determined by the specific category of refund involved, and an amendment curtailing the limitation period for unutilised input tax credit refund claims operates prospectively and cannot divest vested rights for prior periods.

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