Case Details
Case Title: Patanjali Foods Ltd. v. Union of India
Court: High Court of Gujarat, Ahmedabad
Petition Number: R/Special Civil Application No. 17298 of 2024
Judgment Date: 12 February 2025
Category of Dispute: Refund under Inverted Duty Structure (Input Tax Credit)
Relevant Sections: Section 54(3), Section 54(1), Section 73, Section 50, Section 122, Section 107, Section 108 of the CGST Act, 2017; Rule 89(5) of CGST Rules
Notifications/Circulars Involved: Notification No. 9/2022-CT (Rate) dated 13.07.2022, Notification No. 13/2022-CT dated 05.07.2022, Circular No. 181/13/2022-GST dated 10.11.2022
Facts (Paras 3–8)
Patanjali Foods Ltd., engaged in manufacture and sale of edible oil, filed a refund claim dated 05.12.2023 under Section 54(3) of the CGST Act for February–March 2021 on account of inverted duty structure. Initially, a show cause notice was issued citing pending demand, but the petitioner clarified that demands stood withdrawn by NCLT. Refund was accordingly sanctioned on 12.01.2024. Later, the department issued a notice under Section 73 alleging erroneous refund based on Circular No. 181/13/2022, leading to confirmation of demand of ₹1.70 crore plus interest and penalty vide Order-in-Original dated 10.09.2024.
Questions Before Court (Paras 8–9)
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Whether para 2(2) of Circular No. 181/13/2022-GST dated 10.11.2022 applying Notification 9/2022 retrospectively is valid?
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Whether refund already sanctioned and attained finality could be reopened by show cause notice under Section 73 without appeal/revision under Section 107/108?
Observations (Paras 10–11.6)
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Circulars cannot override statutory provisions and must be applied prospectively when adverse to taxpayers (Suchitra Components Ltd., Mysore Electrical Industries Ltd., Poulose & Mathen).
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The Court had earlier in Ascent Meditech Ltd. v. Union of India struck down para 2(1) of the same Circular for creating artificial classification based on filing date.
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Para 2(2) similarly created an artificial class by disallowing refund applications filed after 13.07.2022 even for past periods, though Section 54(1) allows a two-year limitation.
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Refund was sanctioned on 12.01.2024 and not appealed against; therefore, it had attained finality. Issuing a Section 73 notice thereafter was without jurisdiction.
Judgment (Paras 12–Final)
The Court struck down para 2(2) of Circular No. 181/13/2022-GST dated 10.11.2022 as arbitrary, discriminatory, violative of Article 14, and ultra vires Section 54. The Order-in-Original dated 10.09.2024 demanding recovery of refund was quashed. The refund sanction order dated 12.01.2024 was held final and binding.
Case Law Referred
| Case | Court | Verdict |
|---|---|---|
| Suchitra Components Ltd. v. CCE, Guntur (2009) 208 ELT 321 (SC) | Supreme Court | Beneficial circulars apply retrospectively; oppressive circulars apply prospectively. |
| CCE, Bangalore v. Mysore Electrical Industries Ltd. (2006) 204 ELT 517 (SC) | Supreme Court | Clarificatory/beneficial notifications must be applied retrospectively. |
| CCE v. Himachal Aluminium Pvt. Ltd. (2009) 236 ELT 47 (HP HC) | HP High Court | Notifications affecting rights operate prospectively unless stated otherwise. |
| Poulose & Mathen v. CCE (1997) 90 ELT 264 (SC) | Supreme Court | When two views are possible, interpretation in favour of assessee should prevail. |
| Ascent Meditech Ltd. v. Union of India (2024) | Gujarat High Court | Struck down para 2(1) of same Circular; held retrospective denial of refund formula arbitrary. |
Between Fine Lines
For industry, this judgment is a clear safeguard: refund claims filed within limitation but relating to periods before 18.07.2022 cannot be denied by citing the date of filing. Once refund is sanctioned and unchallenged, it attains finality and cannot be reopened through Section 73 notices. Businesses can rely on this precedent to contest arbitrary retrospective application of refund restrictions.
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