The Delhi High Court addressed the issue of refund claims for unutilised Input Tax Credit (ITC) in a case involving M/s Kanika Exports and M/s Malik Seasoning and Spices Pvt. Ltd. against the Union of India. The petitioners had their refund claims rejected on the grounds of being time-barred, with the department counting the limitation period from the date of exports. However, the petitioners argued that the limitation should start from the end of the financial year, as their claims involved unutilised ITC from zero-rated supplies.
The court examined whether the refund applications were indeed time-barred and whether the amended definition of the "relevant date" should be applied retrospectively. The court clarified that GST law provides distinct rules for different types of refunds, such as those arising from exports, inverted duty structures, or unutilised ITC. It found that applying export-based limitations to ITC refunds was legally incorrect. The court held that the specific provisions for ITC refunds should be applied in such cases.
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Furthermore, the court determined that the 2019 amendment, which narrowed the limitation period, could not be applied retrospectively to deny refund claims that had already accrued. Applying the amendment retrospectively would unjustly extinguish valid claims. The court allowed the refund claim emphasized that the limitation period should be computed logically, beginning only after the right to claim a refund crystallises, ensuring the purpose of granting refund benefits under GST is not defeated.
Order Date - 18 April 2026
Parties: M/s Kanika Exports and M/s Malik Seasoning and Spices Pvt. Ltd. Vs Union of India & Ors.
Facts -
- M/s Kanika Exports, engaged in garment exports, filed a refund claim of accumulated ITC for FY 2017–18 on 29 March 2020, but the department rejected it as time-barred by counting limitation from export dates.
- The petitioner argued that since it was a case of unutilised ITC from zero-rated supplies, limitation should run from the end of the financial year, making the claim timely.
- M/s Malik Seasoning and Spices Pvt. Ltd. similarly filed refund claims in March 2021 for inverted duty structure ITC, but these were also rejected as time-barred by applying the amended law.
- Both petitioners approached the Delhi High Court claiming that authorities wrongly applied amended provisions retrospectively and ignored the correct interpretation of Section 54.
Issue -
- Whether refund applications for unutilised ITC were time-barred and whether the amended definition of “relevant date” applies retrospectively?
Order -
- The Court explained that GST law provides distinct rules depending on the nature of refund - exports, inverted duty, or unutilised ITC. Hence, blindly applying export-based limitation to ITC refund cases is legally incorrect.
- Where refund arises from accumulated ITC (including zero-rated supplies), the provision relating specifically to ITC must be applied. The authorities erred in treating all export-related refunds under the same rule.
- The Court held that the 2019 amendment narrowing the limitation period cannot take away an already accrued right. Applying it retrospectively would unjustly extinguish valid refund claims of taxpayers.
- The Court emphasized that limitation must be computed logically, only after the right to claim refund crystallises. Any interpretation starting limitation earlier would defeat the purpose of granting refund benefits under GST.
- The Court allowed the refund claim and held that relevant date would be reckoned as per the unamended Explanation 2(e) i.e., end of the financial year, as the case relates to unutilised ITC.
