Delhi High Court Sets Aside Rejection of Refund Claims

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 20.04.2026

Delhi High Court Sets Aside Rejection of Refund Claims

The Delhi High Court’s decision in the case of M/s Kanika Exports v. Union of India & Ors. (pronounced on April 18, 2026) addresses a critical issue for exporters and GST-registered businesses: What is the correct period of limitation for filing GST refund applications, especially after statutory amendments? This article provides a detailed, accessible analysis of the judgment, its background, legal reasoning, and implications for taxpayers.

Background: The Dispute

Two petitioners, M/s Kanika Exports (a garment exporter) and M/s Malik Seasoning and Spices Pvt. Ltd. (a manufacturer/exporter), filed refund applications for unutilized Input Tax Credit (ITC) under the GST regime. Their claims were rejected by the GST authorities as being time-barred, leading to appeals and, ultimately, writ petitions before the Delhi High Court.

Key Facts:

• Kanika Exports exported goods in FY 2017-18 and filed a refund application on March 29, 2020, for ITC accumulated from July 2017 to March 2018.
• Malik Seasoning and Spices filed refund applications in March 2021 for ITC accumulated due to inverted duty structure for periods July 2017–March 2018 and April 2018–March 2019.
• Both refund claims were rejected as time-barred by the Adjudicating and Appellate Authorities.

The Legal Issue: Which Limitation Period Applies?

The core question was: From which date should the two-year limitation period for filing a GST refund application be calculated?

• The authorities applied the date of export (Explanation 2(a) to Section 54 of the CGST Act) or the amended definition of ‘relevant date’ (Explanation 2(e)), which, after February 1, 2019, refers to the due date for furnishing the return under Section 39.
• The petitioners argued that the unamended Explanation 2(e) (which set the relevant date as the end of the financial year in which the refund claim arises) should apply for periods before the amendment.

The Court’s Analysis

1. Statutory Framework

• Section 54(1) of the CGST Act: Refund applications must be filed within two years from the ‘relevant date.’
• Explanation 2(a): For exports, the relevant date is the date the goods leave India.
• Explanation 2(e) (Unamended): For refund of unutilized ITC, the relevant date is the end of the financial year in which the claim arises.
• Explanation 2(e) (Amended from 1 Feb 2019): For refund of unutilized ITC due to inverted duty structure, the relevant date is the due date for furnishing the return under Section 39.

2. Key Judicial Findings

• The Court held that the applicable limitation provision is the one in force at the time the relevant transaction (export or accrual of ITC) occurred, not when the refund application was filed.
• The amendment to Explanation 2(e) is prospective and cannot curtail vested rights for periods prior to its enactment.
• For both Kanika Exports and Malik Seasoning, the unamended Explanation 2(e) applied, meaning the two-year period started from the end of the relevant financial year.

3. Why This Matters

• If the authorities’ view were accepted, exporters could lose their right to claim refunds simply due to a change in law after their transactions, which the Court found unfair and contrary to legislative intent.
• The Court cited supporting judgments from the Bombay, Jammu & Kashmir, and Madras High Courts, reinforcing the principle that limitation amendments are generally prospective unless expressly stated otherwise.

Practical Example

Suppose an exporter made zero-rated supplies in FY 2017-18. Under the unamended law, the two-year period to file a refund application would run from March 31, 2018 (end of the financial year), expiring on March 31, 2020. If the exporter filed the application on March 29, 2020, it would be within time, even if the application was processed after the amendment came into force.

The Court’s Decision

• The High Court set aside the orders rejecting the refund claims as time-barred.
• The GST Department was directed to process the refund applications on their merits within three months.

Implications for Taxpayers

• Refund claims for periods before February 1, 2019, should be assessed using the unamended Explanation 2(e): the end of the financial year as the relevant date.
• Amendments to limitation provisions do not operate retrospectively unless expressly stated.
• Taxpayers should carefully check which version of the law applies to their refund claims, especially for older periods.

Conclusion

The Delhi High Court’s judgment in the Kanika Exports case provides much-needed clarity on the limitation period for GST refund applications. It protects the vested rights of taxpayers and ensures that statutory amendments do not unfairly deprive them of legitimate claims. Exporters and businesses should review their refund applications in light of this judgment and, if wrongly rejected as time-barred, consider seeking redress.

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Source: Delhi High Court

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