The Supreme Court in the case of Union of India & Ors. Versus M/s. Tirth Agro Technology Pvt. Ltd. & Ors. Vide Special Leave Petition (Civil) Diary No. 31632/2025 dated 18.07.2025, confirms that the amended Rule 89(5) introduced by Notification No. 14/2022 cannot be applied retrospectively. Refunds of input services under the inverted duty structure are allowable for the pre-amendment period, i.e., prior to 05.07.2022. The decision provides clarity and finality to exporters and taxpayers with pending refund claims under the earlier version of Rule 89(5).

Facts of the Case: In the case, the respondent i.e. Tirth Agro Technology Pvt. Ltd., exporters had accumulated unutilized Input Tax Credit (ITC) due to the inverted duty structure, where tax on inputs exceeded tax on output supplies. They filed a refund claim under Section 54(3) of the CGST Act, 2017, for the accumulated Input Tax Credit (ITC) arising under the inverted duty structure. Under Rule 89(5) of the CGST Rules, 2017, the formula for refund restricted the claim by excluding input services from the calculation of “Net ITC”.

Subsequently, the government amended Rule 89(5) vide Notification No. 14/2022-CT dated 05.07.2022, which explicitly excluded input services from the refund calculation. A subsequent Circular No. 181/13/2022-GST dated 10.11.2022 clarified that the said amendment was to be applied prospectively, not retrospectively.

The Department (herein petitioner) contended that even for the period prior to 05.07.2022, refund should be calculated by excluding input services, and sought to apply the amendment retrospectively.

The Gujarat High Court in Tirth Agro Technology Pvt. Ltd. v. Union of India held in favor of the assessee, stating that the amendment cannot be applied retrospectively and that input services are eligible for refund for the pre-amendment period.

The Union of India challenged this High Court order before the Supreme Court through Special Leave Petition (Civil) Diary No. 31632/2025.

Issue: Whether the amendment to Rule 89(5) of the CGST Rules via Notification No. 14/2022 and the accompanying Circular dated 10.11.2022 can be applied retrospectively to deny refund of ITC on input services for periods prior to 05.07.2022.

Held that:

The Supreme Court dismissed the Special Leave Petition filed by the Union of India.

The Supreme Court noted that the Gujarat High Court had relied on its earlier decision in Ascent Meditech Ltd. v. Union of India, which had already been challenged and dismissed by the Supreme Court in SLP(C) No. 8134/2025 dated 28.03.2025.

The Union of India, while filing the present SLP in June 2025, had not disclosed the earlier dismissal of the SLP in the Ascent Meditech case.

In view of this factual matrix, and in the absence of any new legal question arising, the Court held that there was no ground for interference. The Special Leave Petition was dismissed and pending applications were also disposed of.

To read the complete judgment 2025 Taxo.online 1643