Amendment to ‘relevant date’ for unutilised ITC refunds operates prospectively and cannot divest vested rights.

The Petitioners, registered under the GST regime, filed applications for the refund of unutilised Input Tax Credit (ITC).

In W.P.(C) 12512/2021, the Petitioner exported readymade garments (zero-rated supplies) between July 2017 and March 2018 and filed a refund claim on March 29, 2020.

The Revenue rejected the claim as time-barred under Explanation 2(a) to Section 54 of the CGST Act, calculating limitation from the date the goods left India.

In W.P.(C) 17538/2022, the Petitioner sought a refund for ITC accumulated due to an inverted duty structure for the periods 2017-18 and 2018-19, filing applications in March 2021.

The Revenue rejected these as time-barred by applying the amended Explanation 2(e) to Section 54 (effective from February 1, 2019), which calculates limitation from the due date of filing returns.

1. What constitutes the "relevant date" for calculating the two-year limitation period for refunding unutilised ITC under Section 54 of the CGST Act?

2. Whether the amendment to Explanation 2(e) to Section 54 of the CGST Act, effective from February 1, 2019, applies retrospectively to refund claims pertaining to periods prior to the amendment?

3. Whether Explanation 2(a) (date of export) or the unamended Explanation 2(e) (end of financial year) applies to refunds of unutilised ITC arising from zero-rated exports?

The Court applied Section 54 of the CGST Act, 2017, which prescribes a two-year limitation from the "relevant date" for refund claims.

It distinguished between Explanation 2(a), which applies to "tax paid" on exports, and the unamended Explanation 2(e), which serves as a specific provision for "unutilised ITC".

The Court relied on the principle that statutory amendments curtailing limitation periods are prospective unless expressly stated otherwise, citing M/s Babasaheb Keda Shetkari Sahakari Soot Girni Ltd. v. State of Maharashtra.

Bharat Oil Traders v. Assistant Commissioner.

It also referenced Section 16 of the IGST Act regarding zero-rated supplies.

The Court reasoned that "tax paid" on exports and "unutilised ITC" are distinct categories.

While Explanation 2(a) governs refunds of actual tax paid at the time of export, the unamended Explanation 2(e) specifically covers unutilised ITC, defining the "relevant date" as the end of the financial year (FY).

Applying Explanation 2(a) to ITC claims would be anomalous as the limitation might expire before the right to claim ITC even matures.

Regarding retrospectivity, the Court held that the right to a refund is a vested right; the February 1, 2019 amendment (shifting the relevant date to the return due date) cannot be applied to transactions occurring prior to its enactment.

For Kanika Exports (FY 2017-18), the end of the FY was March 31, 2018, making the filing on March 29, 2020, timely.

For Malik Seasoning, the unamended provision applied, and the claims were further protected by the Supreme Court’s extension of limitation due to COVID-19.

It ruled that for unutilised ITC claims pertaining to periods before February 1, 2019, the unamended Explanation 2(e) applies, and the limitation must be calculated from the end of the financial year.

The Court set aside the impugned rejection orders and directed the Department to process the refund applications on their merits within three months.

The petitions were disposed of in favor of the Petitioners.