Jodhpur, Sept 10 (Udaipur Kiran): The Rajasthan High Court has provided major relief to businesses by striking down part of a GST circular issued by the Central Board of Indirect Taxes and Customs (CBIC), calling it arbitrary and unconstitutional. The court directed the authorities to decide on the GST refund claim of Arihant Oil & General Mills within three months.

The judgment, delivered by a division bench of Justice Dinesh Mehta and Justice Sangeeta Sharma, is expected to benefit thousands of entrepreneurs and traders across the state, especially those dealing under the Inverted Duty Structure category.

Case Background

The case pertains to Arihant Oil & General Mills, a Sri Ganganagar-based company trading in edible oils. The company had applied on 4 January 2023 for a refund of State GST paid on mustard oil (HSN code 1514) purchased up to 18 July 2022.

In the meantime, the central government issued Notification No. 09/2022 – Central Tax (Rate) on 13 July 2022, effective from 18 July 2022, which restricted refunds of input tax credit (ITC) on several goods, including HSN 1514, under the inverted duty structure.

The dispute centered around CBIC’s Circular No. 181/13/2022-GST, dated 10 November 2022, which clarified that refund claims filed after 18 July 2022 would not be entertained, even if they pertained to tax paid earlier.

Court’s Observations

Senior advocate Sanjeev Johri, assisted by Shubhankar Johri, argued that taxpayers retained the right to claim refunds for goods purchased before 18 July 2022, since Section 54 of the CGST Act, 2017 allows applications within two years.

The court agreed, holding that the circular created two arbitrary classes of applicants — those who applied before 18 July 2022 and those who applied after — despite both being entitled under the law. This, the bench ruled, violates Article 14 of the Constitution.

Justice Mehta, in the order, wrote that the circular’s interpretation effectively barred legitimate refund claims and was inconsistent with the parent notification.

The Verdict

The High Court declared Point No. 2 of the circular invalid, set it aside, and instructed the authorities to process the company’s refund claim filed on 4 January 2023 within three months, without relying on the struck-down provision.

This judgment is expected to set a precedent for similar refund disputes pending across Rajasthan and beyond.