Facts of the Case:

In this case, the petitions concern refund claims of unutilised Input Tax Credit (ITC) under Section 54 of the CGST Act in two different factual scenarios. In the first case, the petitioner exported goods without payment of tax (zero-rated supplies) during FY 2017–18 and subsequently filed a refund application on 29 March 2020 for accumulated ITC. The refund was rejected by the Adjudicating Authority and Appellate Authority as time-barred by computing limitation from the date of export under Explanation 2(a).

In the second case, the petitioner claimed refund of accumulated ITC due to inverted duty structure for FY 2017–18 and 2018–19 through applications filed in March 2021. These claims were also rejected as time-barred by applying the amended Explanation 2(e) (effective 01.02.2019), which prescribes the due date of return filing as the “relevant date.”

In both matters, the petitioners challenged the rejection orders, contending that the limitation should be computed based on the unamended Explanation 2(e), i.e., from the end of the financial year, and that the amendment could not be applied retrospectively.

Issue:

Whether the amendment to Explanation 2(e) of Section 54, effective from 1st February 2019, could be applied retrospectively to refund claims pertaining to earlier periods, and whether the relevant date for refund of unutilised ITC on exports should be determined under Explanation 2(a) (date of export) or Explanation 2(e), which specifically deals with such refunds.

Held That:

The Court held that the amendment to Explanation 2(e) is prospective in nature and cannot be applied retrospectively to curtail vested rights of taxpayers. It was observed that the right to claim refund, along with the applicable limitation period, crystallizes on the date of the transaction and cannot be taken away by a subsequent amendment unless expressly provided.

The Court further clarified that Explanation 2(a) and Explanation 2(e) operate in distinct fields while Explanation 2(a) governs refund of tax paid on exports, Explanation 2(e) specifically applies to refund of unutilised ITC under Section 54(3). Therefore, in cases involving refund of unutilised ITC, Explanation 2(e) alone would be applicable. Applying Explanation 2(a) in such cases would lead to anomalies and could render the statutory benefit of ITC refund illusory.

It was clarified that refund of unutilised ITC is a separate and distinct category of refund, requiring fulfilment of statutory conditions such as availment, reflection in the Electronic Credit Ledger, and remaining unutilised. Therefore, such refund claims must be governed by Explanation 2(e), which is a special provision, while Explanation 2(a) is a general provision applicable to export of goods involving tax paid.

Consequently, for the periods prior to 1st February 2019, the relevant date must be determined as per the unamended Explanation 2(e), i.e., the end of the financial year. On this basis, the Court concluded that the refund applications were filed within the prescribed limitation period. Accordingly, the impugned orders rejecting the refund claims as time-barred were set aside, and the Department was directed to process the refund claims on merits.

This decision reinforces that refund of unutilised ITC is a distinct category governed exclusively by Explanation 2(e) to Section 54 and not by Explanation 2(a), which applies only to tax-paid export refunds. It affirms that amendments affecting limitation periods are prospective unless expressly stated otherwise, and that taxpayers possess a vested right to claim refund under the law as it existed at the time of the transaction. The ruling also highlights that interpreting “relevant date” incorrectly can defeat substantive benefits

Case Name: M/s. Kanika Exports and M/s. Malik Seasoning And Spices Private Limited Versus Union of India & Ors. And Commissioner Of Goods And Service Tax. dated 18.04.2026