₹11.77 Crore GST Refund Writ Dismissed; GSTAT Remedy Available: Orissa HC

Paradeep Phosphates Limited Vs Union of India And Others (Orissa High Court)

Summary: The petitioner-company, engaged in manufacturing fertilizers, challenged the Order-in-Appeal dated 27.11.2024 to the extent it upheld recovery of Rs.11,77,05,976/- relating to refund of accumulated input tax credit under the inverted duty structure. The petitioner sought exercise of jurisdiction under Article 226 of the Constitution of India, including directions for refund of the amount reversed in excess and a declaration concerning the retrospective applicability of the amendment to Rule 89(5) of the CGST Rules.

The petitioner discharged GST at 5% on outward supplies of fertilizers under Notification No.1/2017-CT (Rate) dated 28.06.2017. Since the GST rate on outward supplies was lower than the rate on inputs and input services, the petitioner claimed refund of accumulated input tax credit for seven months ranging from July 2017 to June 2018 under section 54(3) of the CGST Act/OGST Act read with Rule 89(5) of the CGST/OGST Rules. The Assistant Commissioner, GST and Central Excise, Cuttack-II Division sanctioned the refund.

Rule 89(5) was subsequently amended with retrospective effect from 01.07.2017 by Notification No.21/2018-CT dated 18.04.2018 read with Notification No.26/2018-CT dated 13.06.2018. The Supreme Court, in Union of India & Ors. Vs VKC Footsteps India Pvt Ltd., sustained the validity of the amendment. Thereafter, a notice in Form GST-DRC-01 dated 03.07.2019 was issued and the Assistant Commissioner passed the adjudication Order-in-Original in Form GST-DRC-07 dated 08.11.2019 confirming recovery of the refunded amount under section 73 of the GST Act.

The petitioner subsequently pursued proceedings before the Orissa High Court and the Supreme Court. By order dated 13.03.2023, the Supreme Court dismissed SLP (C) Diary No.4954 of 2023 challenging the Orissa High Court’s order dated 31.10.2022 in W.P.(C) No.21829 of 2018 concerning the vires of Rule 89(5). Thereafter, the Orissa High Court, by order dated 14.07.2023 in RVWPET No.132 of 2023, permitted the petitioner to file an appeal against the adjudication order dated 08.11.2019 before the appellate authority, accompanied by an application for condonation of delay under section 14 of the Limitation Act.

The Additional Commissioner, GST (Appeals), Bhubaneswar disposed of the appeal by order dated 27.11.2024 and granted partial relief. The petitioner thereafter approached the High Court challenging the adverse portion of the appellate order and also sought to challenge the clarification contained in Circular No.181/13/2022-GST dated 10.11.2022 concerning the prospective application of the amendment to Rule 89(5) made by Notification No.14/2022-CT dated 05.07.2022.

The petitioner contended that the amendment was clarificatory and should operate retrospectively and argued that the alternative remedy before the GST Appellate Tribunal under section 112 would be futile. The respondents opposed the writ petition, submitting that Rule 89(5) had been declared valid and that the petitioner could not circumvent the statutory appellate remedy.

The Orissa High Court held that the GST Appellate Tribunal was competent to adjudicate questions of law concerning the applicability of Rule 89(5), including issues arising with reference to circulars and notifications. Relying upon the principle stated in Commissioner of Central Excise, Bolpur Vrs. Ratan Melting and Wire Industries, the Court rejected the petitioner’s apprehension that the Tribunal would be bound by the CBIC circular.

The Court therefore declined to exercise its discretionary jurisdiction under Article 226 against the appellate order because an efficacious statutory remedy was available under section 112 of the GST Act. The Court relied upon Commissioner of Income Tax Vrs. Chhabil Dass Agarwal and Southern Electricity Supply Co. of Orissa Ltd. Vrs. Sri Seetaram Rice Mill. The writ petition was dismissed, while liberty was reserved to the petitioner to avail the remedy under section 112 within the timeline specified in the Ministry of Finance notification dated 30.06.2026. The Court expressly clarified that it had not expressed any opinion on the merits of the Order-in-Appeal.

GST Refund Claimed Under Inverted Duty Structure

The petitioner-company was engaged in manufacturing fertilizers and discharged GST at 5% on outward supplies of fertilizers in terms of Notification No.1/2017-CT (Rate) dated 28.06.2017.

Since the rate of GST on outward supplies was lower than the rate of GST on input and input services, the petitioner claimed refund of accumulated input tax credit for seven months ranging from July 2017 to June 2018 under section 54(3) of the CGST Act/OGST Act read with Rule 89(5) of the CGST/OGST Rules.

The Assistant Commissioner, GST and Central Excise, Cuttack-II Division, Cuttack sanctioned the refund claimed by the petitioner.

Retrospective Amendment to Rule 89(5)

Rule 89(5) of the GST Rules was amended with retrospective effect from 01.07.2017 by Notification No.21/2018-CT dated 18.04.2018 read with Notification No.26/2018-CT dated 13.06.2018.

The validity of the amendment was questioned before the courts. The supplied judgment records that the Supreme Court in Union of India & Ors. Vs VKC Footsteps India Pvt Ltd., reported in (2022) 2 SCC 603 = AIR 2021 SC 4407, sustained the validity of the amendment.

TaxGuru has also published a detailed discussion of the Rule 89(5) dispute in Refund of input services under inverted duty structure – VKC Footsteps.

Recovery of Refund Under Section 73

The Assistant Commissioner issued notice in Form GST-DRC-01 dated 03.07.2019. Thereafter, adjudication Order-in-Original in Form GST-DRC-07 dated 08.11.2019 was passed confirming recovery of the refunded amount by invoking section 73 of the GST Act.

The petitioner subsequently challenged the legal position concerning Rule 89(5) and pursued proceedings before the Orissa High Court and the Supreme Court.

Earlier Proceedings Before the Courts

By order dated 13.03.2023, the Supreme Court dismissed SLP (C) Diary No.4954 of 2023 challenging the order dated 31.10.2022 of the Orissa High Court in W.P.(C) No.21829 of 2018 concerning the vires of Rule 89(5).

The petitioner thereafter filed Review Petition RVWPET No.132 of 2023 before the Orissa High Court. By order dated 14.07.2023, the Court permitted the petitioner to file an appeal against the adjudication order dated 08.11.2019 before the appellate authority, not later than 14.08.2023, accompanied by an application for condonation of delay under section 14 of the Limitation Act citing pendency of the review petition as the reason for delay.

The Court clarified in that order that it had not expressed any view on the matter.

Order-in-Appeal and Present Writ Petition

Pursuant to the direction of the Orissa High Court, the petitioner preferred an appeal against the Order-in-Original dated 08.11.2019. The Additional Commissioner, GST (Appeals), Bhubaneswar disposed of the appeal by order dated 27.11.2024 and granted partial relief.

The petitioner challenged the Order-in-Appeal before the Orissa High Court, including the portion upholding recovery of Rs.11,77,05,976/-.

The petitioner also sought to challenge Circular No.181/13/2022-GST dated 10.11.2022 issued by the Central Board of Indirect Tax and Customs to the extent it clarified that the amendment to Rule 89(5) made by Notification No.14/2022-CT dated 05.07.2022 was not clarificatory and was applicable prospectively.

Petitioner’s Submissions

The petitioner submitted that the refund already granted was sought to be recovered because Rule 89(5), as amended by Notification dated 18.04.2018, allowed refund of unutilized input tax credit on account of inverted duty structure restricted to inputs and that the amendment was subsequently given retrospective effect from 01.07.2017 by Notification dated 13.08.2018, as stated in the submission.

The petitioner sought clarification concerning Circular dated 10.11.2022 and contended that the amendment to Rule 89(5) made by Notification dated 05.07.2022 was clarificatory and should apply retrospectively.

It was further submitted that the alternative remedy of appeal before the GST Appellate Tribunal under section 112 of the GST Act would be futile.

Respondents’ Submissions

The learned Senior Standing Counsel appearing for the State respondents submitted that, after Rule 89(5) of the GST Rules had been declared valid and intra vires, the action of the authorities in seeking recovery of the refunded amount could not be held illegal.

It was further submitted that the Order-in-Original had merged with the Order-in-Appeal and that the petitioner could not circumvent the statutory remedy available under the GST Act.

High Court’s View on the GST Appellate Tribunal Remedy

The Court examined the petitioner’s apprehension that an appeal before the GST Appellate Tribunal would not provide a fruitful remedy because the Tribunal would allegedly be bound by the CBIC circular.

In this context, the Court referred to Commissioner of Central Excise, Bolpur Vrs. Ratan Melting and Wire Industries, (2008) 13 SCC 1. The principle relied upon by the Court was that although circulars and instructions issued by the Board are binding on authorities under the respective statutes, they do not bind the Court in declaring the law concerning statutory provisions.

The Court therefore held that the petitioner’s apprehension that the GST Appellate Tribunal would be unable to clarify the statutory position or would be bound by the circular was without comprehension.

The Court specifically held that the GST Appellate Tribunal was competent to adjudicate disputed facts arising from the Order-in-Appeal as well as questions of law concerning the applicability of Rule 89(5), including with reference to the circulars and notifications issued in that regard.

Alternative Statutory Remedy Under Section 112

The Court declined to exercise its discretionary powers under Article 226 of the Constitution against the appellate order.

The Court held that an efficacious remedy was available to the petitioner under section 112 of the GST Act. It therefore did not entertain the writ petition in view of the parameters laid down by the Supreme Court in Commissioner of Income Tax Vrs. Chhabil Dass Agarwal, reported in (2014) 1 SCC 603, and Southern Electricity Supply Co. of Orissa Ltd. Vrs. Sri Seetaram Rice Mill, (2012) 2 SCC 108.

TaxGuru has previously reported the principle concerning an efficacious alternative remedy in Reassessment order cannot be challenged in Writ – SC.

Liberty to Pursue GST Appellate Tribunal Remedy

Although the writ petition was not entertained, the Court reserved liberty to the petitioner to avail the remedy available under section 112 of the GST Act, if so advised, within the timeline specified in the Ministry of Finance (Department of Revenue) Notification bearing F.No.A-50/7/2025-GSTAT-DoR (S.O.3502(E)), dated 30th June, 2026, published in the Gazette of India, Extraordinary No.3367, dated 30th June, 2026.

The notification specified 31st July, 2026 as the date up to which an appeal or application, as the case may be, could be filed before the Appellate Tribunal in specified cases. It further provided different timelines for orders communicated before 01.05.2026 and orders communicated on or after 01.05.2026, and for orders passed before 01.02.2026 and orders passed on or after 01.02.2026, as set out in the judgment.

No Opinion Expressed on Merits

The Court expressly clarified that it had not expressed its opinion touching upon the merits of the Order-in-Appeal.

The petitioner was directed to adhere to the statutory provisions contained in section 112 read with the terms stipulated in the notification dated 30th June, 2026 issued by the Ministry of Finance (Department of Revenue).

Final Decision

The Orissa High Court found no merit in the writ petition and declined to exercise its discretionary jurisdiction under Article 226 against the Order-in-Appeal.

The writ petition, along with pending Interlocutory Application(s), if any, was dismissed. Liberty was reserved for the petitioner to pursue the statutory remedy under section 112 of the GST Act within the applicable timeline.

The Court made it clear that it had not adjudicated the merits of the Order-in-Appeal.

Cases Discussed

• Union of India and others Vs. VKC Footsteps India Pvt. Ltd., (2022) 2 SCC 603 = AIR 2021 SC 4407
• Commissioner of Central Excise, Bolpur Vrs. Ratan Melting and Wire Industries, (2008) 13 SCC 1
• Commissioner of Income Tax Vrs. Chhabil Dass Agarwal, (2014) 1 SCC 603
• Southern Electricity Supply Co. of Orissa Ltd. Vrs. Sri Seetaram Rice Mill, (2012) 2 SCC 108

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1. The petitioner-company, incorporated under provisions of Companies Act is engaged in the business of manufacturing of fertilizers and it discharges liability of GST @ 5% on the outward supply of fertilizers in terms of Notification No.1/2017-CT (Rate) dated 28.06.2017. Since the rate of GST on outward supply was less than the rate of GST on input and input services, in terms of Section 54(3) of the Central Goods and Services Tax Act/the Odisha Goods and Services Tax Act, 2017 (Collectively, “GST Act”) read with Rule 89(5) of the Central Goods and Services Tax Rules/the Odisha Goods and Services Tax Rules, 2017 (Collectively, “GST Rules”) it claimed refund of accumulated input tax credit for 07 months ranging from July, 2017 to June, 2018. The Assistant Commissioner, GST and Central Excise, Cuttack-II Division, Cuttack sanctioned the refund to the petitioner.

2. Rule 89(5) of the GST Rules suffered an amendment with retrospective effect from 01.07.2017 vide Notification No.21/2018-CT dated 18.04.2018 read with Notification No.26/2018-CT dated 13.06.2018. The validity of such amendment being questioned, the Hon’ble Supreme Court in the case of Union of India and others Vs. VKC Footsteps India Pvt. Ltd. reported in (2022) 2 SCC 603 = AIR 2021 SC 4407 sustained the validity. The Assistant Commissioner, GST and Central Excise, Cuttack-II Division, Cuttack having issued notice in Form GST-DRC-01 dated 03.07.2019 passed adjudication Order-in-Original in Form GST-DRC-07 dated 08.11.2019 confirming recovery of the refunded amount invoking Section 73 of the GST Act.

3. By Order dated 13.03.2023 the Hon’ble Supreme Court dismissed SLP (C) Diary No.4954 of 2023 challenging the order dated 31.10.2022 of this Court in the writ petition being W.P.(C) No.21829 of 2018 challenging vires of Rule 89(5). Said order being carried out by Hon’ble Supreme Court in, came to be dismissed vide order dated 13.03.2023. Thereafter, Review Petition, being RVWPET No.132 of 2023, was filed before this Court, which came to be disposed of vide order dated 14.07.2023 with the following:

“1. Mr. V. Sridharan, learned counsel appearing for the Petitioner states that since the Petitioner has already paid the tax involved without prejudice to the rights and contentions of the parties, at the present moment, if it is satisfied, the Petitioner may be permitted to file appeal within the time to be stipulated by this Court.

2. In that view of the matter, the present petition is disposed of with a clarification to the order dated 31 October, 2022 of this Court by permitting the Petitioner to file an appeal against adjudication order dated 8^th November, 2019 before the appellate authority not later than 14^th August, 2023 accompanied by an application for condonation of delay under Section 14 of the Limitation Act citing the pendency of the present petition as the reason for delay. In such event such application will be considered in accordance with law by the appellate authority. The Court clarifies that it has not expressed any view in the matter.”

4. In pursuance of such direction, appeal against the Order-in-Original dated 08.11.2019 being preferred, the Additional Commissioner, GST (Appeals), Bhubaneswar disposed of the said appeal by order dated 27.11.2024 (Annexure-1) granting partial relief. The petitioner challenging the said Order-in-Appeal dated 27.11.2024, came up before this Court by way of the instant writ petition inter alia on the following grounds (quoted from the Synopsys enclosed to the writ petition):

“(a) The portion of the impugned Circular No.181/13/2022-GST dated 10.11.2022 (Annexure-2) issued by the Opposite Party No.2-Central Board of Indirect Tax and Customs, to the extent it clarifies that the amendment to Rule 89(5) vide Notification No. 14/2022-CT dated 05­07-2022 is not clarificatory and is applicable prospectively, is incorrect and contrary to the legislature’s intention. therefore, portion of the impugned Order is liable to be struck down.

(b) Anomaly corrected in Rule 89(5) vide Notification dated 05.07.2022, is clarificatory in nature and therefore, applies retrospectively. Therefore, portion of the impugned Order, to the extent it is against the Petitioner, is liable to be set aside.

(c) The impugned Order passed by the Opposite Party No.4 is self-contradictory and in violation of the statutory provisions. Therefore, portion of the impugned Order, to the extent it is against the Petitioner, is liable to be set-aside.

(d) Further, the Opposite Party No.5 exceeded Monetary Jurisdiction in the present case. Therefore, portion of the impugned Order, to the extent it is against the Petitioner, is liable to be set-aside.”

5. Mr. Rajesh Ostwal, Advocate along with Mr. Mukesh Panda, learned Advocate appearing for the petitioner-Company submitted that the refund already granted is sought to be recovered inasmuch as Rule 89(5) as amended by Notification dated 18.04.2018 allowed refund of unutilized input tax credit on account of inverted duty structure restricted to inputs only and by Notification dated 13.08.2018 said amendment has been given retrospective effect from 01.07.2017. Therefore, he submitted that praying to clarify circular dated 10.11.2022 issued by the Central Board of Indirect Taxes and Customs the writ petition has been filed. Therefore, he submitted that alternative remedy of appeal before the GST Appellate Tribunal under Section 112 of the GST Act as available to it to challenge the Order-in-Appeal would be futile.

6. Bismay Anand Prusty, learned Senior Standing Counsel appearing for the opposite party Nos.3 and 4 submitted that after the Rule 89 (5) of the GST Rules has been declared valid and intra vires, the action of the authority in seeking to recover the refunded amount cannot be held to be illegal and it cannot be said that the tax sought to be collected by the opposite parties to fall within the scope of Article 265 of the Constitution of India. He further submitted that the Order-in-Original affirmed by the Appellate Authority got merged with Order-in-Appeal. Hence he vociferously submitted that the petitioner cannot be allowed to circumvent the statutory remedy available to it under the statute to ventilate its grievance.

7. Heard Mr. Rajesh Ostwal, learned Advocate along with Mr. Mukesh Panda, learned Advocate appearing for the petitioner-company and Mr. Bismay Anand Prusty, learned Senior Standing Counsel appearing for the GST, Central Tax and Customs for opposite party Nos.3 and 4.

8. The writ petitioner has come up before this Court craving for grant of following reliefs:

“It is, therefore, most humbly prayed that in the facts and circumstances aforesaid, this Honourable Court may graciously be pleased to:

(a) issue a Writ of Mandamus or a Writ in nature of Certiorari or any other Writ/s, Order/s and/or Direction/s under Article-226 of the Constitution of India to quash and set aside portion of the impugned Order-in-Appeal No.601/IGST/BBSR/ADC/2024-25 dated 27-11-2024 (Annexure-1), passed by the Opposite Party No.4-Additional Commissioner, GST (Appeals), Bhubaneswar to the extent it upheld recovery of the refund to the extent of Rs.11, 77,05,976/-;

(b) issue a Writ of Mandamus or any other Writ/s, Order/s and/or Direction/s under Article-226 of the Constitution of India, directing the Opposite Parties herein to refund the Petitioner a sum of Rs.11,77,05,976/- along with the applicable interest, which the Petitioner reversed in excess;

(c) issue a Writ of Mandamus or a Writ in nature of Certiorari or any other Writ/s, Order/s and/or Direction/s under Article 226 of the Constitution of India to quash and set aside portion of the impugned Circular No.181/13/2022-GST dated 10-11-2022 (Annexure-2) issued by the Opposite Party No.2-Central Board of Indirect Tax and Customs to the extent it clarifies that amendment to Rule 89(5) of the CGST Rules vide Notification No.14/2022-CT dated 05.07.2022 is not clarificatory in nature and is applicable prospectively;

(d) issue a Writ of Mandamus or a Writ in nature of Certiorari or any other Writ/s, Order/s and/or Direction/s under Article-226 of the Constitution of India, declaring that amendment to Rule-89(5) vide Notification No.14/2022-CT dated 05-07-2022 is clarificatory in nature and therefore applies retrospectively;

(e) grant Ad-interim order in terms of prayers above;

(f) direct the Opposite Parties for Costs of and incidental to this Writ Petition; and

(g) pass such further or other Writ/s, Order/s and/or Direction/s be passed and/or Direction/s be given as to which this Honourable Court may deem fit and proper.

And for this act of kindness, the Petitioner as in duty bound shall ever pray.”

9. Cursory glance at the pleadings of the writ petition and the prayers made therein indicates that the petitioner seeks a declaration that Circular dated 10.11.2022 issued by the Central Board of Indirect Taxes would be applicable prospectively. In this connection the apprehension of the petitioner that the appeal before the GST Appellate Tribunal would not yield fruitful result can be repelled by the following observation made in Commissioner of Central Excise, Bolpur Vrs. Ratan Melting and Wire Industries, (2008) 13 SCC 1:

“7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.”

10. Such being the legal perspective the apprehension of the petitioner that the GST Appellate Tribunal would not be in a position to clarify the position with respect to statutory provisions and would be bound by the Circular is without comprehension. In the considered opinion of this Court, the GST Appellate Tribunal is competent to adjudicate not only the disputed fact emanating from the Order-in-Appeal but also question of law vis-à-vis applicability of Rule 89(5) of the GST Rules as amended with specific reference to the Circulars/Notifications issued in this regard.

11. This Court, therefore, does not feel it apposite to exercise its discretionary powers under Article 226 of Constitution of India to entertain the writ petition against the appellate order. Since efficacious remedy is available to question the tenability of the Order-in-Appeal under Section 112 of the GST Act, the writ petition is not entertained in view of the parameters laid down by the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vrs. Chhabil Dass Agarwal reported in (2014) 1 SCC 603 and Southern Electricity Supply Co. of Orissa Ltd. Vrs. Sri Seetaram Rice Mill, (2012) 2 SCC 108.

12. In view of the aforesaid, this Court does not find any merit in the instant writ petition. However liberty is reserved for the petitioner to avail the remedy available under Section 112 of the GST Act, if it is so advised, within the time-line specified in the Ministry of Finance (Department of Revenue) Notification bearing F.No.A-50/7/2025-GSTAT-DoR (S.O.3502(E)), dated 30^th June, 2026 published in the Gazette of India, Extraordinary No.3367, dated 30^th June, 2026, which reads as follows:

“In exercise of the powers conferred by sub-section (1) read with sub-section (3) of section 112 of the Central Goods and Services Tax Act, 2017 (12 of 2017) and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue number S.O. 4220(E), dated the 17 September, 2025, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), except as respects things done or omitted to be done before such supersession, the Government, on the recommendations of the Council, hereby notifies the 31^st day of July, 2026, as the date upto which appeal or application, as the case may be, may be filed before the Appellate Tribunal under this Act in respect of all cases where the order sought to be appealed against, —

i. is communicated to the person preferring the appeal before the 1st day of May, 2026, and all appeals in respect of order communicated on or after 1st May, 2026, may be filed before the Appellate Tribunal as provided in sub­section (1) of section 112 within three months from the date on which such order is communicated;

ii. is passed before the 1st day of February, 2026, and all applications in respect of orders passed on or after 1st February, 2026 may be filed before the Appellate Tribunal as provided in sub-section (3) of section 112 within six months from the date on which the said order has been ”

13. It needs to be clarified that this Court has not expressed its opinion touching upon the merit of the Order-in-Appeal. The petitioner shall adhere to the statutory provisions contained in Section 112 read with terms stipulated in Notification dated 30^th June, 2026 issued by the Ministry of Finance (Department of Revenue) as referred to above.

14. Accordingly, the writ petition along pending Interlocutory Application(s), if any, stands dismissed.