GST Update

 Desk of CA. Praveen Sharma – 1030 Series (CAPS) 

 DELHI HIGH COURT  IN THE CASE OF Kanika Exports v. Union of India & Ors.

The Delhi High Court has held that the amendment to Explanation 2(e) of Section 54 of the CGST Act, made effective from 1 February 2019, cannot be applied retrospectively to reject refund claims of unutilised Input Tax Credit (ITC) as time-barred.

In this case, the petitioner had filed refund claims for accumulated ITC on zero-rated supplies. The GST Department rejected the claims by applying the amended definition of "relevant date" retrospectively and treating the applications as barred by limitation.

The petitioner argued that the amendment is prospective in nature and cannot take away the vested statutory right to claim refund that had already accrued under the unamended provisions of the law.

The Department, however, contended that the amended Explanation 2(e) should govern the computation of limitation, resulting in rejection of the refund applications.

The High Court observed that refund of unutilised ITC under Section 54(3) is a distinct category and cannot be equated with refund of tax paid on exported goods or services. It further held that the amendment introduced from 1 February 2019 operates prospectively and cannot be given retrospective effect in the absence of an express legislative provision.

Accordingly, the Court ruled that a vested statutory right to seek refund cannot be curtailed by a subsequent amendment unless the legislature clearly provides for retrospective application.

The rejection orders were set aside, and the GST authorities were directed to reconsider and process the refund claims on their merits in accordance with law.

The judgment clarifies that for refund claims relating to periods prior to 1 February 2019, limitation must be determined under the unamended provisions of the CGST Act. Taxpayers whose refund claims were rejected solely on the basis of retrospective application of the amendment may be entitled to appropriate relief.

Key Sections: Section 54(3) and Explanation 2(e) of the CGST Act, 2017.

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CAPS