Amendments Cannot Rob Taxpayers of Vested Refund Rights: J&K High Court Quashes GST Refund Rejection as Time-Barred

"Change in Law Can't Operate Retrospectively to Defeat a Right That Already Accrued Under Previous Statute"— In a significant ruling that reinforces the sanctity of vested rights in fiscal legislation, the High Court of Jammu & Kashmir and Ladakh at Jammu quashed a GST refund rejection order issued against Bharat Oil Traders on grounds of limitation. The Division Bench of Justices Sindhu Sharma and Shahzad Azeem held that the amendment to Section 54 of the CGST Act, which redefined the “relevant date” for filing refund claims, cannot be applied retrospectively to extinguish refund claims that had already accrued prior to the amendment.

“The amended definition of ‘relevant date’ which took effect from 01.02.2019 cannot be applied retrospectively to curtail a vested right under the pre-amended statute,” the Court observed, holding that the petitioner’s refund application filed on 02.02.2021 was well within limitation when viewed in light of both the unamended statute and the COVID-related relaxation granted via CBIC Notification No. 13/2022.

Refund Right Arising Before Amendment Cannot Be Nullified After the Fact

The core dispute in Bharat Oil Traders v. Assistant Commissioner & Anr. [WP(C) No. 192 of 2023] revolved around whether the refund claim filed under Section 54(3)(ii) of the CGST Act for the period July 2017 to March 2019 was time-barred. The petitioner, engaged in the business of edible oil, was operating under an “inverted tax structure,” wherein the input tax rate exceeded the output tax rate. This scenario entitled them to seek a refund of accumulated Input Tax Credit (ITC).

However, the refund was rejected on the ground that the application, filed on 02.02.2021, was beyond the prescribed time limit. The rejection order relied on the post-amendment definition of “relevant date,” which was substituted with effect from 01.02.2019 and triggered a shorter limitation window tied to the due date for furnishing returns under Section 39.

The High Court, however, categorically rejected the retrospective application of this amendment and held:

“The right to claim refund with respect to a period preceding the amendment cannot be curtailed by a subsequent legislative change unless such amendment is explicitly retrospective.”

Notification No. 13/2022 and COVID Relaxations Rescued Refund Claims

Crucially, the Bench gave full effect to Notification No. 13/2022-Central Tax dated 05.07.2022, which excluded the period from 01.03.2020 to 28.02.2022 from computation of limitation under Section 54. Applying this exclusion, the Court observed that:

“The refund claim filed on 02.02.2021 for the period July 2017 to March 2019 falls squarely within the extended limitation period due to the exclusion of the COVID period, and therefore, is not time-barred.”

The Court specifically noted that the respondents themselves conceded that claims from February 2018 to December 2018 were within limitation. Regarding the period July 2017 to January 2018, the Court applied the pre-amended provision of Section 54 and held that:

“Even for the earlier periods, the two-year limitation from the end of the financial year (March 2020) would stand extended owing to the pandemic-related notification. Hence, no portion of the claim is time-barred.”

“Substantive Amendment Affecting Vested Rights Presumed Prospective Unless Clearly Made Retrospective”

In an authoritative analysis of the temporal reach of statutory amendments, the Court placed heavy reliance on landmark Supreme Court decisions including Harshit Harish Jain v. State of Maharashtra, MP Steel Corporation v. CCE, and Vinod Gurudas Raikar v. National Insurance Co., to conclude that limitation amendments that shorten existing timeframes cannot divest accrued rights unless the law clearly mandates retrospectivity.

The Bench observed: “Though periods of limitation are procedural, a shorter limitation period introduced by a subsequent amendment cannot retrospectively extinguish an accrued cause of action.”

Referring to S.L. Srinivasa Jute Twine Mills v. Union of India, the Court reiterated the settled position that:

“Every statute which impairs vested rights, creates new obligations, or attaches new disabilities in respect of past transactions must be presumed to be prospective unless there is express legislative intent to the contrary.”

Non-Speaking Order Rejected—Refund Cannot Be Denied Without Reasoned Justification

The Court also took strong exception to the manner in which the refund claim for the period January to March 2019 was rejected, allegedly on the ground of “ineligible inputs.” Noting the absence of specific findings or reasons, the Bench held:

“The order rejecting the claim is cryptic and lacks application of mind. Refunds cannot be denied on vague assertions without identifying the actual grounds of ineligibility.”

Accordingly, the Court set aside the impugned order dated 30.09.2022 and remanded the matter back to the adjudicating authority for fresh determination in accordance with law and the observations contained in the judgment.

Fiscal Law Must Balance Technicality With Fairness

While allowing the writ petition, the Court underscored the equitable dimensions of tax administration:

“Denying a legitimate refund solely on technical grounds of limitation, especially when the timing of the application falls close to a legislative amendment, fails to strike the equitable balance expected in fiscal determinations.”

The decision sends a clear signal that procedural amendments cannot be applied to unsettle rights already crystallized under prior law. It also reaffirms that pandemic-era relaxations under CBIC notifications must be given full effect while computing statutory limitation periods.

Date of Decision: 30th December 2025