ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 02.12.2025
Gujarat High Court Rules in Favor of Shah Paperplast Industries Ltd. in (ITC) GST Refund for EOU Unit
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
In a landmark judgment, the Gujarat High Court has ruled in favor of Shah Paperplast Industries Ltd. & Anr., granting them relief in a long-standing dispute over GST refund claims. The case revolved around the denial and withdrawal of refunds for unutilized input tax credit (ITC) under the Central Goods and Services Tax Act, 2017 (GST Act) and related rules. โ The judgment, delivered by Honourable Justice, has set a significant precedent for exporters and businesses operating as 100% Export Oriented Units (EOUs). โ
Background of the Case
Shah Paperplast Industries Ltd., a 100% Export Oriented Unit (EOU), is engaged in the manufacture and export of tissue paper, wrapping paper, and disposable plastic products. โ The company had filed refund applications under Section 54(3) of the GST Act, claiming refunds for unutilized ITC on zero-rated supplies made without payment of tax. โ However, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. โ 172/04/2022-GST on July 6, 2022, which stated that tax paid on deemed exports would not be considered as ITC for calculating refunds under Rule 89(4) or Rule 89(5) of the GST Rules. โ
Following this circular, the Assistant Commissioner of Central GST & Excise, Vadodara-I, issued show-cause notices to Shah Paperplast Industries Ltd., seeking to withdraw the refunds already granted for the period from December 2021 to March 2022. The company challenged the circular and the subsequent orders, arguing that the circular was ultra vires to the GST Act and should not be applied retrospectively. โ
Key Issues Addressed by the Court
The court addressed several critical questions in this case:
- Was the refund claim rightly disallowed due to the petitioners not filing under Rule 89(4A)? โ The court ruled that the petitioners were not deemed exporters but actual exporters of goods, making them eligible for refunds under Section 54(3) of the GST Act and Rule 89(4) of the GST Rules. โ The court clarified that Rule 89(4A) was not applicable to the petitioners as their suppliers did not claim deemed export benefits. โ
- Could the circular be applied retrospectively? โ The court found that the circular was clarificatory in nature and did not apply to the petitioners’ case. โ Therefore, the question of retrospective application was not addressed in detail. โ
- Were the respondents justified in reviewing the refund sanction orders and issuing notices under Section 73 of the GST Act? โ The court deemed this issue academic, as it had already ruled in favor of the petitioners on the merits of the case.
Court’s Decision
The Gujarat High Court quashed all orders and notices issued by the respondents to withdraw or reject the refund claims of Shah Paperplast Industries Ltd. โ The court directed the respondents to process and pay the refund claims within 12 weeks from the date of the judgment. โ The court also rejected the respondents’ request to stay the judgment. โ
Implications of the Judgment
This ruling is a significant win for exporters and EOUs, as it reinforces their entitlement to claim refunds for unutilized ITC on zero-rated supplies made without payment of tax. โ The judgment also clarifies the scope of deemed exports under the GST Act and the applicability of Circular No. 172/04/2022-GST. Businesses can now rely on this precedent to challenge any unjust denial or withdrawal of GST refunds.
Conclusion
The Gujarat High Court’s decision in favor of Shah Paperplast Industries Ltd. is a testament to the judiciary’s role in upholding the rights of businesses under the GST framework. It provides clarity on the treatment of deemed exports and zero-rated supplies, ensuring that exporters can claim their rightful refunds without undue interference. โ This case serves as a reminder of the importance of adhering to the provisions of the GST Act and the need for fair and transparent implementation of tax laws.
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Source: Gujarat High Court
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