GSTAT Hyderabad rules that refund of pre-18 July 2022 accumulated ITC cannot be denied merely because the refund application was filed later. Know the Kedia Agro ruling.
Introduction
In an important ruling concerning GST refund claims under the Inverted Duty Structure (IDS), the Hyderabad Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has held that refund of accumulated Input Tax Credit (ITC) pertaining to a period before 18 July 2022 cannot be rejected merely because the refund application was submitted after that date.
The Tribunal clarified that an executive circular issued by the Central Board of Indirect Taxes and Customs (CBIC) cannot retrospectively take away a taxpayer’s substantive right to claim a refund of eligible ITC accumulated before the introduction of a statutory restriction.
The ruling provides significant relief to businesses whose refund claims relate to the pre-July 2022 period, particularly manufacturers affected by an inverted tax structure.
Case Details
- Case Name: Kedia Agro v. Principal Commissioner, Hyderabad GST Commissionerate & Ors.
- Case Number: APL/194/HYD/2026
- Tribunal: GST Appellate Tribunal, Hyderabad Bench
- Date of Decision: 27 October 2026
- Bench: Judicial Member Sushil Kumar Sharma and Technical Member Duvvuri Krishna Srinivas
Background of the Dispute
Kedia Agro, engaged in the manufacturing and supply of edible oils, accumulated substantial unutilised Input Tax Credit because the GST rate applicable to certain inputs was higher than the rate charged on its outward supplies.
This resulted in an accumulation of ITC under the inverted duty structure, making the company eligible to seek a refund under Section 54 of the Central Goods and Services Tax Act, 2017, read with the applicable provisions of Rule 89 of the CGST Rules.
The refund claim related to the period from May 2020 to March 2021.
Initially, the taxpayer filed a refund application for approximately ₹65.04 lakh on 18 June 2022. Subsequently, the application was withdrawn, and a fresh refund application amounting to ₹61,47,671 was filed on 25 March 2023.
However, the Assistant Commissioner of Central Tax rejected the fresh refund application on 23 May 2023. The rejection was primarily based on Notification No. 09/2022-Central Tax (Rate), effective from 18 July 2022, and CBIC Circular No. 181/13/2022-GST dated 10 November 2022.
The first appellate authority also upheld the rejection on 28 March 2024.
Department’s Stand
The GST department contended that the refund restriction applicable to specified goods falling under Chapters 15 and 27 of the Customs Tariff applied because the fresh refund application had been filed after 18 July 2022.
According to the department, the taxpayer’s earlier refund application had been withdrawn and, therefore, could not preserve its entitlement under the provisions prevailing before the amendment.
Consequently, the department maintained that the fresh application should be examined under the legal provisions applicable on the date of filing rather than the period during which the ITC had accumulated.
Taxpayer’s Arguments
The taxpayer challenged the rejection, arguing that the disputed ITC had accumulated during May 2020 to March 2021, much before the restriction introduced with effect from 18 July 2022.
It was further submitted that the fresh refund application was filed within the limitation period prescribed under Section 54 of the CGST Act.
The taxpayer contended that an administrative circular could not retrospectively alter the substantive eligibility for a refund relating to an earlier tax period. The subsequent filing of a refund application could not, by itself, extinguish a right that had already accrued under the law prevailing when the ITC accumulated.
GSTAT Hyderabad’s Findings and Observations
After examining the rival submissions, the GSTAT Hyderabad Bench held that Notification No. 09/2022-Central Tax (Rate) could not be applied to deny refund of ITC accumulated before 18 July 2022 merely because the refund application was filed subsequently.
The Tribunal emphasised that an executive circular cannot impose a retrospective restriction on an existing statutory entitlement without appropriate legislative authority.
An important observation of the Tribunal was:
“ITC is a right accrues to the assessee on the date when dutiable goods / services were bought in the course of furtherance of business. Such a right can’t be curtailed by the interpreting an executive circular by giving it retrospective effect, without any statutory / legal backings.”
The Tribunal also took note of various High Court decisions that had struck down the CBIC circular to the extent that it sought to determine refund eligibility based on the date of filing the application rather than the period in which the ITC had accumulated.
Accordingly, the Tribunal rejected the department’s interpretation that the subsequent filing of the refund application automatically attracted the restriction introduced from 18 July 2022.
Final Decision of the Tribunal
The GSTAT Hyderabad Bench allowed the taxpayer’s appeal and set aside the orders passed by the original adjudicating authority and the first appellate authority.
However, instead of directly sanctioning the refund, the Tribunal remanded the claim of ₹61,47,671 to the original adjudicating authority for fresh consideration in accordance with law. The authority was also directed to examine the taxpayer’s claim for interest.
Legal Significance and Implications for Taxpayers
This ruling reinforces an important principle of GST jurisprudence: substantive refund rights cannot be retrospectively curtailed through executive instructions.
The decision is particularly relevant for manufacturers and businesses dealing with inverted duty structures, where the accumulation of ITC may arise over several tax periods.
Businesses having accumulated ITC before 18 July 2022 should examine whether their refund claims were rejected solely on the ground that applications were filed after the introduction of the restriction.
The judgment also highlights the importance of distinguishing between the period of ITC accumulation and the date of filing a refund application.
Nevertheless, taxpayers must satisfy the applicable statutory conditions, documentary requirements and limitation provisions under Section 54 of the CGST Act.
Conclusion
The GSTAT Hyderabad ruling in Kedia Agro v. Principal Commissioner, Hyderabad GST Commissionerate & Ors. is a significant development for taxpayers seeking refunds of accumulated ITC under the inverted duty structure.
It reiterates that administrative circulars cannot override statutory rights or retrospectively impose restrictions that were not applicable when the relevant ITC accumulated.
The decision offers an important legal basis for challenging similar refund rejections, subject to the facts and applicable statutory provisions of each case.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute legal advice. Readers should refer to the original GSTAT order and applicable statutory provisions before taking any action.