Retrospective Refund Restrictions Quashed: Adani Wilmar Ruling

For businesses operating under an inverted duty structure, GST refunds are essential for survival. But what happens if the government issues a "clarification" that suddenly takes away your right to a refund for a period that's already passed? The Calcutta High Court has reached a definitive conclusion: Your legal right to a refund cannot be stolen by a retrospective circular.

"19. It is settled law that although, ordinarily, law of limitation applies retrospectively, yet there are certain exceptions to the rule. One such exception is that a provision that curtails the existing period of limitation would be inapplicable to accrued causes of action. In the present case, the cause of action (i.e. cause of action to apply for refund) accrued to the petitioner on the date the petitioner filed its return. Such right to claim refund would continue till the expiry of the period mentioned in Section 54(1) of the said Act of 2017. The same could, therefore, not have been curtailed by an executive circular by giving it retrospective effect."

A taxpayer's right to a benefit, such as a refund, is often a "vested right" once the conditions for that benefit have been met. Executive circulars are meant to "explain" or "clarify" the law; they cannot rewrite it. If a statute (the CGST Act) provides a clear window for claiming a refund, an administrative instruction issued by the tax department cannot slam that window shut for a period that has already concluded.

Key Takeaways

• Refund rights accrue on the relevant date and cannot be curtailed by retrospective circulars.
• Executive circulars cannot override the CGST Act or statutory limitation periods.
• Taxpayers can challenge refund rejections based solely on retrospective clarifications.

Who This Applies To

Businesses claiming GST refunds under inverted duty structures or facing circular-based restrictions.

The Facts

The case involved M/s Adani Wilmar Limited, a supplier of edible oils, who applied for a refund of accumulated ITC due to an inverted duty structure for the month of March 2022. The application was filed on April 17, 2024, well within the statutory two-year period. However, the GST authorities rejected the claim, citing a Central Circular (No. 181/13/2022-GST) issued on November 10, 2022. This circular claimed that a new restriction on refunds (imposed in July 2022) would apply retrospectively to all applications filed after July 18, 2022, even if the refund related to an earlier period.

The Law

• Section 54(1) of the CGST Act, 2017: This section states that a taxpayer has two years from the "relevant date" to claim a refund.
• Section 54, Explanation 2(e): Defines the "relevant date" for inverted duty structure refunds as the due date for filing the GSTR-3B return for that period.
• Vested Rights Doctrine: The principle that substantive rights accrued under a statute cannot be taken away retrospectively without express legislative authority.

Arguments

The petitioner argued that their right to the refund was "locked in" the moment they filed their return in April 2022. Since they had two years to claim it under the law, a later circular issued in November 2022 could not take that right away. The Revenue argued that the circular was merely clarificatory and because the actual application for refund was made in April 2024 (after the circular), the new restrictions must apply.

• Petitioner Contentions: The assessee argued that the substantive right to claim an inverted duty refund accrued on the date of filing the monthly GSTR-3B return in April 2022. Because Section 54(1) grants an unhindered two-year limitation window, an administrative instruction (Circular No. 181/13/2022-GST issued in November 2022) cannot retrospectively curtail an accrued cause of action.
• Revenue Contentions: The Department argued that the circular was purely clarificatory and that since the formal refund application was submitted on April 17, 2024 (subsequent to the July 2022 notification and November 2022 circular), the restrictive conditions applied to all pending and future applications.
• Judicial Precedents Analyzed: The Court concurred with harmonious rulings across coordinate High Courts upholding accrued refund rights:
  • Gujarat High Court in Patanjali Foods Ltd. vs. Union of India (R/Special Civil Application No. 17298 of 2024).
  • Allahabad High Court in Vaibhav Edibles Pvt. Ltd. vs. State of U.P. (Writ Tax No. 1060 of 2024, decided on 13.11.2025).
  • Rajasthan High Court in Shree Arihant Oil & General Mills vs. Union of India (D.B. Civil Writ Petition No. 2932 of 2023, decided on 08.09.2025).
  • Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. vs. Union of India (W.P. No. 5253 of 2023 & batch, decided on 29.01.2025).

Practical Impact

Refund rejections based on retrospective circulars can be successfully challenged before writ courts where statutory Section 54(1) limitation timelines were met.

The Decision

Verdict: Writ Petition Allowed.

The Calcutta High Court held that the right to claim a refund under Section 54(1) is a substantive statutory right accruing on the return filing date. An executive circular, being subordinate delegated guidance, cannot extinguish an accrued cause of action retrospectively. The Court quashed the refund rejection orders and directed the Proper Officer to process the accumulated ITC refund on merits.

Case Details

• Court / Forum: High Court at Calcutta (Constitutional Writ Jurisdiction)
• Case Name: M/s Adani Wilmar Limited vs. Assistant Commissioner of State Tax & Ors.
• Case Number: WPA 30244 of 2024
• Date of Judgment: 25th February 2026
• Statutory Provisions: Section 54(1), Section 54(3), Explanation 2(e) to Section 54 of the CGST Act, 2017; Circular No. 181/13/2022-GST.