Gujarat High Court
M/S. Kush Proteins Pvt. Ltd vs Union Of India on 18 July, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5747 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✔
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M/S. KUSH PROTEINS PVT. LTD. & ANR.
Versus
UNION OF INDIA & ORS.
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Appearance:
MR NAITIK N SHAH(11495) for the Petitioner(s) No. 1,2
MR NIRAV P SHAH(6475) for the Petitioner(s) No. 1,2
MR ANKIT SHAH(6371) for the Respondent(s) No. 1,2,3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 18/07/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)
1. Heard learned advocate Mr. Nirav Shah for
the petitioners and learned advocate Mr. Ankit
Shah for the respondents.
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2. Rule, returnable forthwith. Learned
advocate Mr. Ankit Shah waives service of
notice of rule for and on behalf of the
respondents.
3. Having regard to the controversy involved
in this petition, with the consent of the
learned advocates for the respective parties,
the matter is taken up for final hearing.
4. Present petition preferred under Article
226 of the Constitution of India assails the
correctness and validity of order dated
29.2.2024 as well as order dated 31.3.2023
passed by the Assistant Commissioner, Central
Goods & Service Tax and Excise, Division-VIII
(Anand), Vadodara-1 (hereinafter referred to
as 'the respondent' for short) wherein the
respondent was pleased to reject the refund
application preferred by the petitioners under
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Section 54 of the Central Goods & Service Tax
Act, 2017 (hereinafter referred to as 'the
CGST' for short.
5. The facts leading to the filing of the
present petition are as under:
5.1 The petitioners are in business of
manufacturing and trading of edible oil,
cattle feed, palmolein oil, mustard oil, etc.
The products of the petitioners are classified
under Chapter-15 of the Customs Tariff Act,
1975 (hereinafter referred to as 'the Tariff
Act' for short). As per the Tariff Act, the
products of the petitioners attract 5% rate of
GST. It is the case of the petitioners that
the raw materials for manufacturing aforesaid
products are received attracting higher rate
of tax under the provisions of the Act.
Therefore, the petitioners have always
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availed accumulation of Input Tax Credit (for
short 'ITC') due to inverted tariff structure.
It is the case of the petitioners that as per
Section-54(3) of the CGST Act, the petitioners
can avail refund of the aforesaid accumulated
credit.
5.2 It is the case of the petitioners that the
Department had issued Notification No. 5/2017
dated 28.06.2017 under Section 54(3)(ii)
restricting refund of unutilized input tax
credit in case of goods mentioned in the
notification. The products belonging to the
petitioners were not mentioned in Table of
Notification dated 28.6.2017. Therefore, the
petitioners were entitled to get refund of
accumulated ITC under Section 54(3)(ii).
Subsequently, another Notification being
Notification No. 9/2022 dated 13.07.2022 came
to be issued by the Department wherein the
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products belonging to the petitioners were
notified as not being eligible for refund of
accumulated ITC. It is the case of the
petitioners that Notification No. 9/2022 was
made effective from 18.07.2022 and, therefore,
the petitioners had filed various refund
applications for the period prior to
18/07/2022. The refund applications were made
on 23/01/2023. Pursuant to the Refund
Applications preferred by the petitioners, the
respondent had issued show-cause notice for
rejection of the refund applications. The
petitioners could not represent their case
before the adjudication authority. Therefore,
by way of order dated 31.3.2023 the refund
application was rejected ex-parte.
5.3 Being aggrieved by order dated 31.3.2023,
the petitioner preferred an appeal before the
appellate authority. By way of impugned order
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dated 29.2.2024, the appeal preferred by the
petitioners was dismissed on merits. Being
aggrieved by the impugned orders dated
31.3.2023 and 29.2.2024, the petitioners have
preferred the present writ petition.
6. Heard learned advocate Mr. Nirav Shah for
the petitioners and learned advocate Mr. Ankit
Shah for the respondent.
7. It was submitted by learned advocate Mr.
Nirav Shah for the petitioners that the
petitioners had filed refund applications u/s.
54 of the CGST Act. As per section-54(1), an
application for refund can be filed before the
expiry of 2 years from the relevant date. The
petitioners had filed all applications for
refund within 2 years as per time limit
prescribed u/s. 54(1). In such facts, the
refund claims could not have been rejected.
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Hence, the orders are passed in gross
violation of provisions of section-54(1) of
the CGST Act and hence the same are not
sustainable and requires to be quashed and set
aside.
8. It was further submitted that Notification
No. 9/2022 dated 13.07.2022 has amended
Notification No. 5/2017 restricting the refund
of accumulated credit on products manufactured
by the present Petitioners. As per the
Notification itself, the notification was made
effective from 18.07.2022. In such facts, it
was submitted that the petitioners were
eligible for refund of accumulated ITC for
period up to 17.07.2022 and rejection of
refund claims for the period prior to
18.07.2022 is bad in law and requires to be
quashed and set aside.
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9. It was further submitted that the
respondent Authorities had relied upon
Circular No. 181/13/2022 dated 10.11.2022 to
hold that application filed after 18.07.2022
could not be eligible for refund. It was
submitted that in the clarification itself,
the department had stated that the
Notification had come into force with effect
from 18.07.2022. The restriction imposed vide
Notification No. 9/2022 on refund of
unutilized ITC on account of inverted tax
structure would apply prospectively only. This
would mean that for the period prior to
18.07.2022, any person manufacturing specified
goods is eligible for refund of unutilized
ITC. Hence, the clarification stating that all
refund applications filed on or after
18.07.2022, would not be eligible for refund
was ultra vires the plain language of the
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notification and provisions of Section 54(1)
of the CGST Act and hence the same is illegal
and without jurisdiction and requires to be
struck down.
10. Further, it was submitted by learned
advocate Mr. Nirav Shah for the petitioners
that the issue is no more res integra pursuant
to order of this Court in the case of
Patanjali Foods Ltd. v. Union of India & Ors,
rendered in Special Civil Application No.
17298 of 2024.
11. Per contra, learned advocate Mr. Ankit
Shah for the respondents acceded to the fact
and could not controvert the issue as the
whole issue is covered by the decision
rendered by this Court in case of Patanjali
Foods Ltd. v. Union of India & Ors (Supra).
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12. Having heard learned advocates for the
parties and perused the material on record,
the sole issue for consideration is that the
application for refund preferred by the
petitioners was within statutory period of
limitation and the same was pertaining to
period prior to issuance of Circular No. 9 of
2022. Therefore, the mere fact that the refund
application filed after 30.7.2022 can be
construed as reason for denial of ITC. The
issue is now squarely covered in case of
Patanjali Foods Ltd. v. Union of India & Ors
(Supra), wherein it is observed in paras-11
and 12 as under:
"11. DISCUSSION AND FINDINGS :-
11.1 Notification No.09/2022 -Central
Tax dated 13.07.2022 reads as under:-
"G.S.R. (E). In exercise of the
powers conferred by clause (ii) of
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the proviso to sub-section of section
54 of the Central Goods and Services
Tax Act, 2017 (12 of 2017), the
Central Government, on the
recommendations of the Council,
hereby makes the following further
amendments in the notification of the
Government of India in the Ministry
of Finance (Departm of Revenue), No.
5/2017-Central Tax (Rate), dated the
28th June, 2017, published in the
Gazette of India, Extraordinary, Part
II, Section 3, Sub-section (i), vide
number G.S.R. 677(E), dated 28th
June, 2017, namely :-
In the said notification,
(i) in the opening paragraph, in the
proviso, in clause (i), for the words
and figure "serial numbers 1", the
words, figure and letters "serial
numbers 1AA" shall be substituted;
(ii) in the TABLE, S. No. 1 shall be
re-numbered as S.No. 1AA, and before
S. No. 1AA as re-numbered, the
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following serial numbers and entries
shall be inserted, namely :-
(1) (2) (3)
"1A. 1507 Soya-bean oil and its fractions,
whether or not refined, but not
chemically modified
1B. 1508 Ground-nut oil and its fractions,
whether or not refined, but not
chemically modified.
1C. 1509 Olive oil and its fractions,
whether or not refined, but not
chemically modified.
1D. 1510 Other oils and their fractions,
obtained solely from olives,
whether or not refined, but not
chemically modified, including
blends of these oils or fractions
with oils or fractions of heading
1E. 1511 Palm oil and its fractions,
whether or not refined, but not
chemically modified.
1F. 1512 Sunflower-seed, safflower or
cotton-seed oil and fractions
thereof, whether or not refined,
but not chemically modified.
1G. 1513 Coconut (copra), palm kernel or
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babassu oil and fractions
thereof, whether or not refined,
but not chemically modified.
1H. 1514 Rape, colza or mustard oil and
fractions thereof, whether or not
refined, but not chemically
modified.
1I. 1515 Other fixed vegetable or
microbial fats and oils
(including jojoba oil) and their
fractions, whether or not
refined, but not chemically
modified. Vegetable fats and oils
and their fractions, partly or
wholly hydrogenated, inter-
esterified, re-esterified or
elaidinised, whether or not
refined, but not further
prepared.
1J. 1516 Vegetable fats and oils and their
fractions, partly or wholly
hydrogenated, inter-esterified,
re-esterified or elaidinised,
whether or not refined, but not
further prepared.
1K. 1517 Edible mixtures or preparations
of vegetable fats or vegetable
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oils or of fractions of different
vegetable fats or vegetable oils
of this Chapter, other than
edible fats or oils or their
fractions of heading 1516
1L. 1518 Vegetable fats and oils and their
fractions, boiled, oxidized,
dehydrated, sulphurised, blown,
polymerized by heat in vacuum or
in inert gas or otherwise
chemically modified, excluding
those of heading 1516
1M. 2701 Coal; briquettes, ovoids and
similar solid fuels manufactured
from coal
1N. 2702 Lignite, whether or not
agglomerated, excluding jet
1O. 2703 Peat (including peat litter),
whether or not agglomerated"
Thus, it is clear from the bare
perusal of the Notification that "this
Notification shall come into force on the
18th day of July, 2022"
11.2 Notification No.13/2022- Central Tax
dated 05.07.2022, reads as under:-
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"G.S.R.......(E). In exercise of the
powers conferred by section 168A of the
Central Goods and Services Tax Act, 2017
(12 of 2017) (hereinafter referred to as
the said Act) read with section 20 of
the Integrated Goods and Services Tax
Act, 2017 (13 of 2017) and section 21 of
the Union Territory Goods and Services
Tax Act, 2017 (14 of 2017) and in
partial modification of the
notifications of the Government of India
in the Ministry of Finance (Department
of Revenue), No.35/2020-Central Tax,
dated the 3 April, 2020, published in
the Gazette of India, Extraordinary,
Part II, Section 3, Sub-section (i),
vide number G.S.R. 235(E), dated the 3rd
April, 2020 and No.14/2021-Central Tax,
dated the 1st May, 2021, published in the
Gazette of India, Extraordinary, Part
II, Section 3, Sub-section (i), vide
number G.S.R. 310(E), dated the 1st May,
2021, the Government, on the
recommendations of the Council, hereby,-
(i) extends the time limit specified
under sub-section (10) of section 73 for
issuance of order under sub-section (9)
of section 73 of the said Act, for
recovery of tax not paid or short paid
or of input tax credit wrongly availed
or utilized, in respect of a tax period
for the financial year 2017-18, up to
the 30th day of September, 2023;
(ii) excludes the period from the 1st
day of March, 2020 to the 28th day of
February, 2022 for computation of period
of limitation under sub-section (10) of
section 73 of the said Act for issuance
of order under sub-section (9) of
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section 73 of the said Act, for recovery
of erroneous refund;
(iii) excludes the period from the 1st
day of March, 2020 to the 28th day of
February, 2022 for computation of period
of limitation for filing refund
application under section 54 or section
55 of the said Act.
2. This notification shall be deemed to
have come into force with effect from
the 1 day of March, 2020."
11.3 Circular dated 10.11.2022 issued by
the GST Policy Wing reads as under:-
To
The Principal Chief Commissioners/ Chief
Commissioners/ Principal
Commissioners/Commissioners of Central
Tax (All)
The Principal Directors General/
Directors General (All)
Madam/Sir,
Subject: Clarification on refund related
issues-reg.
Attention is invited to sub-section (3)
of section 54 of CGST Act, 2017, which
provides for the refund of unutilized
input tax credit in cases where credit is
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accumulated on account of rate of tax of
inputs being higher than the rate of tax
on output supplies i.e. on account of
inverted duty structure. Sub-rule (5) of
rule 89 of CGST Rules, 2017 prescribes
the formula for grant of refund in cases
of inverted duty structure. Vide
Notification No.14/2022-Central Tax dated
05.07.2022, amendment has been made in
the formula prescribed under sub-rule (5)
of rule 89 of the CGST Rules, 2017.
Further, vide Notification No.09/2022-
Central Tax (Rate) dated 13.07.2022,
which has been made effective from
18.07.2022, the restriction has been
placed on refund of unutilised input tax
credit on account of inverted duty
structure in case of supply of certain
goods falling under chapter 15 and 27.
2. Representations have been received
from the trade and the field formations
seeking clarification on various issues
pertaining to the implementation of the
above notifications. In order to clarify
the issues and to ensure uniformity in
the implementation of the provisions of
law across the field formations, the
Board, in exercise of its powers
conferred by section 168 (1) of the
Central Goods and Services Tax Act, 2017
(hereinafter referred to as "CGST Act"),
hereby clarifies the issues as under:
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S. Issue Clarification
No.
1. Whether the Vide Notification No.
formula prescribed 14/2022-Central Tax
under sub-rule (5) dated 05.07.2022,
of rule 89 of the amendment has been
CGST Rules, 2017 made in sub-rule (5)
for calculation of of rule 89 of CGST
refund of Rules, 2017,
unutilised input modifying the formula
tax credit on prescribed therein.
account of The said amendment is
inverted duty not clarificatory in
structure, as nature and is
amended vide applicable
Notification No. prospectively with
14/2022-Central effect from
Tax dated 05.07.2022.
05.07.2022, will Accordingly, it is
apply only to the clarified that the
refund said amended formula
applications filed under sub-rule (5) of
on or after rule 89 of the CGST
05.07.2022, or Rules, 2017 for
whether the same calculation of refund
will also apply in of input tax credit
respect of the on account of
refund inverted duty
applications filed structure would be
before 05.07.2022 applicable in respect
and pending with of refund
the proper officer applications filed on
as on 05.07.2022 or after 05.07.2022.
The refund
applications filed
before 05.07.2022
will be dealt as per
the formula as it
existed before the
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amendment made vide
Notification No.
14/2022-Central Tax
dated 05.07.2022.
2. Whether the Vide Notification No.
restriction placed 09/2022-Central Tax
on refund of (Rate) dated
unutilised input 13.07.2022, under the
tax credit on powers conferred by
account of clause (ii) of the
inverted duty first proviso to sub-
structure in case section (3) of
of certain goods section 54 of the
falling under CGST Act, 2017,
chapter 15 and 27 certain goods falling
vide Notification under chapter 15 and
No. 09/2022- 27 have been
Central Tax (Rate) specified in respect
dated 13.07.2022, of which no refund of
which has been unutilised input tax
made effective credit shall be
from 18.07.2022, allowed, where the
would apply to the credit has
refund accumulated on
applications account of rate of
pending as on tax on inputs being
18.07.2022 also or higher than the rate
whether the same of tax on the output
will apply only to supplies of such
the refund specified goods
applications filed (other than nil rated
on or after or fully exempt
18.07.2022 or supplies). The said
whether the same notification has come
will be applicable into force with
only to refunds effect from
pertaining to 18.07.2022.
prospective tax
periods? The restriction
imposed vide
Notification No.
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09/2022-Central Tax
(Rate) dated
13.07.2022 on refund
of unutilised input
tax credit on account
of inverted duty
structure in case of
specified goods
falling under chapter
15 and 27 would apply
prospectively only.
Accordingly, it is
clarified that the
restriction imposed
by the said
notification would be
applicable in respect
of all refund
applications filed on
or after 18.07.2022,
and would not apply
to the refund
applications filed
before 18.07.2022.
3. It is requested that suitable trade
notices may be issued to publicized the
contents of this Circular.
4. Difficulty, if any, in implementation
of this Circular may please be brought to
the notice of the Board. Hindi version
would follow.
11.4 This Court in the case of Ascent
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Meditech (Supra) has held as under :-
"48. In view of the foregoing
reasons, the impugned order dated
24.08.2023 is hereby quashed and set
aside. The Circular No. 181/22 dated
10.11.2022 so far as it clarifies
that the amendment is not
clarificatory in nature is quashed
and set aside and it is held that the
Notification No. 14/2022 is
applicable retrospectively as the
amendment brought in Rule 89(5) of
the Rules is curative and
clarificatory in nature and the same
would be applicable retrospectively
to the refund or rectification
applications filed within two years
as per the time period prescribed
under section 54(1) of the Act. Rule
is made absolute to the aforesaid
extent. "
11.5 Thus, it is seen that this Court
in Ascent Meditech(Supra) has struck down
para 2(1) of the same Circular dated
10.11.2022 on the ground that an
artificial class of assessees cannot be
created on the basis of date of filing of
refund application.
11.6 By that exact logic, Para 2(2) of
the impugned circular dated 10.11.2022 in
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so far as it provides that the
restriction contained in notification no.
13.7.2022 will apply to all the refund
applications filed after 13.7.2022, even
though they are pertaining to a period
prior to the date of notification, is
wholly arbitrary, discriminatory and
ultra-vires Section 54 of the GST Act as
well as violating Article 14 of the
Constitution of India. The circular
itself states that the notification dated
13.7.2022 has prospective effect. Even
otherwise, the restriction contained in
notification dated 13.7.2022 was
introduced for the first time on such
date and by expressly stating that it
would apply prospectively and that too
from 18.7.2022. If that be so, then
refund pertaining to period prior to
13.7.2022 cannot be affected by such
notification. Section 54(1) of the GST
Act clearly gives a time limit of 2
years for filing of the refund
application and such time limit was
extended by notification no. 13/2022
because of the Covid-19 pandemic. The
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application filed by the Petitioner was
within the statutory period of limitation
and the same was pertaining to period
prior to 13.7.2022. Mere fact that the
refund application was filed after
13.7.2022 cannot result in denial of
refund to the Petitioner even though the
refund application was filed within the
statutory period of limitation. The
circular creates an artificial class
amongst assessees based on the date of
filing of refund application even though
the refund application is filed within
the statutory period of limitation and
the refund is pertaining to the same
period. Para 2 of the impugned circular
is therefore grossly discriminatory and
violative of Article 14 of the
Constitution of India as well as ultra-
vires Section 54 of the GST Act.
12. In view of the discussion
hereinabove, the present petition
succeeds and is accordingly allowed. The
impugned para 2(2) of the Circular No.
181/13/2022-GST dated 10.11.2022 is
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struck down. Further it is undisputed
that the respondents had granted refund
to the petitioner after passing a
sanction order dated 12.01.2024. However,
by way of a show cause notice under
Section 73 of the CGST Act in Form GST-
DRC-01, the respondents had issued a
demand notice under Section 73 of the
CGST Act which eventually resulted in
passing of the impugned Order-in-Original
dated 10.09.2024 where, the demand of
Rs.1,70,07,091/- was confirmed along with
a penalty of Rs.17,00,709/-. Therefore,
it will be seen that against the
petitioner's refund application dated
05.12.2023, there has been an
adjudication of the same by order dated
12.01.2024, by which the petitioner's
refund application was accepted and the
refund sanction granted. It is further
not in dispute that no appeal under
Section 107 or Revision under Section
108 of the CGST Act, 2017 has been
preferred by the respondents, challenging
the adjudication of the petitioner's
refund application and the consequent
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refund order sanctioned on 12.01.2024.
Therefore, in the opinion of this Court,
the grant of refund to the petitioner by
order dated 12.1.2024 had become final
and no show cause notice could be issued
by the respondents to take away the
benefits of a quasi judicial order in the
petitioner's favour. Thus, the Order-in-
Original dated 10.9.2024, by which the
show cause notice dated 02.05.2024 was
adjudicated, is illegal and
unsustainable and the same deserves to be
quashed and set aside. The Order-in-
Original dated 10.09.2024 is therefore,
quashed and set aside. Rule is made
absolute to the aforesaid extent. No
order as to costs."
13. In view of the above settled proposition
of law, the impugned order dated 31.3.2023 in
Refund Application as well as the impugned
order dated 29.2.2024 in Order in Appeal are
illegal and unsustainable and the same deserve
to be quashed and set-aside and are
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accordingly quashed and set-aside. Rule is
made absolute to the aforesaid extent. No
order as to costs.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
SAJ GEORGE
