GST Refund Is Vested Right, Cannot Be Limited By Retrospective Application Of 2019 Amendment: J&K&L High Court

The High Court of Jammu & Kashmir and Ladakh has held that the 2019 amendment to the GST law changing the limitation period for claiming refund of unutilised input tax credit cannot be applied retrospectively to deny refund claims relating to periods prior to 1 February 2019.

The Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem while deciding a writ petition filed by Bharat Oil Traders, a partnership firm engaged in the refilling and sale of edible oil and ghee.

The petitioner was registered under the GST laws and operated under an inverted tax structure, where the tax rate on inputs was higher than the rate on outward supplies. Due to this, it accumulated unutilised input tax credit and claimed refund under Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017. The refund claims related to the period from July 2017 to March 2019.

The tax authorities rejected the refund claims mainly by saying they were filed late. They relied on the amendment to Section 54, which came into effect from 1 February 2019 through Section 23 of the Central Goods and Services Tax (Amendment) Act, 2018. This amendment changed how the time limit for claiming refunds is calculated.

Under the amended law, the two-year limitation period starts from the due date of filing the monthly return under Section 39, instead of from the end of the financial year as was allowed under the earlier law.

Bharat Oil Traders argued that this amendment could not be applied to periods before its enforcement, since the right to claim refund had already accrued under the unamended provision. It was also submitted that the refund application filed on 2 February 2021 was within time because CBIC Notification No. 13/2022 excluded the period from 1 March 2020 to 28 February 2022 from computation of limitation due to the COVID-19 pandemic.

During the hearing, the revenue conceded that refund claims for the period from February 2018 to December 2018 were not time-barred in view of the limitation exclusion granted by the notification. However, it maintained that refund claims for the earlier period from July 2017 to January 2018 were barred.

The High Court rejected this stand and held that an amendment which reduces the limitation period cannot be applied retrospectively to take away vested rights. The Bench observed that refund rights for periods prior to 1 February 2019 had already crystallised under the old law and could not be defeated by a later amendment unless the statute clearly provided for retrospective operation.

The Court also noted that the refund claim for January to March 2019 had been rejected without any proper reasoning on the alleged ineligibility of inputs.

Accordingly, the High Court set aside the appellate order dated 30 September 2022 and remanded the matter for fresh consideration, holding that the refund claims could not be rejected solely on technical grounds of limitation.

Case Title: Bharat Oil Traders v. Assistant Commissioner & anr.

Case Number: WP(C) No. 192/2023

Counsel for Petitioner: Sachin Sharma

Counsel for State: Rohan Nanda

Citation: 2026 LLBiz HC (JAM) 1

Click Here To Read/Download Order