Facts of the Case

M/s. Sea 6 Energy Private Limited, a manufacturer and exporter of biostimulants and potash operating a seasonal industry, claimed refund of accumulated input tax credit on account of zero-rated export supplies for the month of March 2025. The claim was partially allowed by an order dated 24.06.2025 in Form GST-RFD-06. The petitioner challenged this order, contending that its full accumulated ITC should be treated as available for the refund calculation for March, even though the turnover figures used in the formula were confined to March alone.

Issues Involved

  1. Whether the expression "relevant period" appearing throughout the Rule 89(4) refund formula (in the definitions of turnover, Net ITC and Adjusted Total Turnover) must be construed consistently for all components of the formula.
  2. Whether an exporter can selectively treat "relevant period" as the narrow claim month for turnover while claiming the benefit of a wider period's accumulated ITC for the Net ITC component.

Petitioner's Arguments

  • Reiterated the contentions in its affidavit that it was entitled to the full refund as claimed, contrary to the Department's partial sanction.

Respondent's Arguments

  • Filed a detailed counter affidavit, taking the Court through the record to justify the partial sanction of refund under the Rule 89(4) formula.

Court Order / Findings

  • The Court examined the Rule 89(4) formula — Refund Amount = Net ITC × (Turnover of zero-rated supply of goods and services ÷ Adjusted Total Turnover) — and noted that the expression "relevant period" is embedded in the definition of every term used in the formula.
  • Held that "relevant period" must be uniformly construed across the entire formula; the petitioner could not treat March as the relevant period for turnover while simultaneously claiming full-year accumulated ITC (availed across the year but claimed for utilisation in March) as the Net ITC for the same claim.
  • Finding the petitioner had proceeded under a misconception, the Court permitted a fresh application applying the formula consistently for the "relevant period", with the respondent to apply the formula and pay any further amount due within eight weeks of the fresh application; since the portal may not accept a fresh application, a manual application was permitted.

Important Clarification

  • The term "relevant period" in the Rule 89(4) ITC refund formula for zero-rated supplies must be applied consistently to every variable in the formula — turnover of zero-rated supply, Net ITC, and Adjusted Total Turnover cannot each be computed using a different notion of the claim period.
  • Where the portal is unable to process a corrected fresh refund application, courts have permitted manual filing to ensure the formula's proper (uniform) application is not defeated by system limitations.

Sections Involved

  • Section 54, CGST Act, 2017 — refund of tax, including on zero-rated supplies.
  • Section 16, IGST Act, 2017 — zero-rated supply.
  • Rule 89(4), CGST Rules, 2017 — formula for refund of ITC on zero-rated supply without payment of tax.

Decision – In Favour of

Disposed of with directions, partly in favour of the Assessee — the petitioner retains the right to a corrected refund via a fresh (manual) application, but on the Department's construction of "relevant period" being applied uniformly, not the petitioner's mixed approach.

Case Details

Court: Madurai Bench of Madras High Court
Case No.: W.P.(MD) No. 26287 of 2025 and W.M.P.(MD) No. 20444 of 2025
Coram: Hon'ble Mr. Justice G.R. Swaminathan
Date of Order: 21st November, 2025

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