Swastik Oil Industries & Ors. vs. Union of India & Ors. (D.B. Civil Writ Petition Nos. 11549/2023 & connected matters)
Brief Facts
- The petitioners challenged denial of refund of accumulated ITC under inverted duty structure for periods prior to 18.07.2022.
- The issue was whether refund claims relating to ITC accumulated prior to 18.07.2022 could be denied merely because the application was filed after that date.
- The Division Bench noted that the issue was no longer res integra and relied on its earlier decision in Shree Arihant Oil & General Mills vs. Union of India, along with judgments of Andhra Pradesh, Gujarat and Allahabad High Courts, and Supreme Court decisions.
The Court held that ITC is an indefeasible right accruing on purchase, and restriction introduced from 18.07.2022 operates prospectively. Refund of ITC accumulated prior to 18.07.2022 cannot be denied merely because the application was filed after that date
All writ petitions were allowed.
2. Important Key Takeaways
(A) ITC is an Indefeasible Right
The Court reaffirmed that Input Tax Credit accrues on the date of purchase and becomes a vested right, relying on Dai Ichi Karkaria and earlier precedents.
(B) Prospective Operation of Notification (18.07.2022)
The restriction introduced from 18.07.2022 applies only to ITC arising after that date. It does not affect ITC already accumulated before 18.07.2022.
(C) Circular Cannot Override Statute
The Court followed the Andhra Pradesh High Court view (affirmed by Supreme Court dismissal of SLP) that Circular No. 181/13/2022-GST cannot deny refund of ITC that accrued prior to 18.07.2022.
3. Authors Comment – Impact on Businesses
This is a significant ruling for industries operating under inverted duty structure (including edible oil, refining, and manufacturing sectors).
Business Implications:
- Refund of ITC accumulated prior to 18.07.2022 cannot be denied based on subsequent circular/clarification.
- Circulars or FAQs cannot retrospectively curtail vested credit rights.
- Strengthens working capital protection for manufacturers facing inverted duty structure.
The judgment ensures certainty and continuity in GST refund jurisprudence and aligns Rajasthan with the pan-India judicial trend on this issue.