No Order Can Be Issued Invoking Rule Rule 96(10) After Omission w.e.f. 08.10.2024

Held by Hon’ble High Court of Uttarakhand at Nainital

In the matter of

M/s Sri Sai Vishwas Polymers Versus Union of India and Another

(Writ Petition (MB) No. 103 of 2025)

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The Petitioner is a partnership Firm engaged in the manufacturing of Gold bars and jewellery. During the audit, it was found that the petitioner had claimed a refund of INR 1.05 Crores under GST. Accordingly, the Respondent issued a show Cause Notice under section 74(1) of the CGST Act, requiring the petitioner to show cause why the alleged inadmissible/ erroneous refund amount should not be recovered along with interest and penalty according to Rule 96(10) of the CGST Rules. The Petitioner furnished a detailed response against the SCN. However, the Respondent confirmed the demand without considering the submission vide order dated 03.02.2025. 

The Provisions of Rule 96(10) were omitted vide Notification No. 20/2024 – Central Tax dated 08-10-2024 w.e.f. 08-10-2024.

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The Petitioner contended that The Proceedings were initiated based on the allegation of contravention of provisions of Section 96(10) of CGST Rules. Once the Rule is omitted w.e.f. 08.10.2024, the proceeding initiated by the respondents could not have been continued further.

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Hon’ble High Court held that In case of omission of rule, if a provision of a statute is omitted unconditionally without a saving clause in favour of pending proceeding, all actions must stop where the omission finds them, and if the final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. In the given case, Rule 96(10) has been omitted without any saving clause. Considering the absence of a saving clause in favour of the pending proceedings, all actions from the date of such omission of the rule must stop. Accordingly, there is no scope for the Respondent to pass any order by invoking the provisions of rule 96(10) of the CGST Rule, 2017, after the same was omitted on 08.10.2024 without a saving clause in favour of the pending proceeding.  Accordingly, the writ petition is allowed and the impugned order is set aside.

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1. Brief Facts of the Case:

• M/s Sri Sai Vishwas Polymers (“The Petitioner”) is a Partnership Firm engaged in the manufacturing of Gold Bar and Jewellery, etc.
• The Petitioner is claiming Input Tax Credit (“ITC”) on inward supplies of goods or services and charging CGST, SGST and IGST on outward supplies;
• The Department conducted an audit of the petitioner, wherein it appeared that the petitioner had claimed a refund of INR 1.05 Crores under the IGST.
• The Department issued the Show Cause Notice (“SCN”) under Section 74(1) of the IGST Act to the petitioner requiring him to show cause why the alleged inadmissible/erroneous refund amount should not be recovered along with interest and penalty;
• The Petitioner furnished a detailed response against SCN. However, the Respondent confirmed the alleged demand without considering the submissions of the petitioner vide order dated 03.02.2025. 
• Therefore, the petitioner filed the writ petition.

2. Relevant Legal Extract

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Relevant Provisions of the GST Law are reiterated below for ready reference:

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Rule 96(10) of the CGST Rules is reiterated below:

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“Rule 96 - Refund of integrated tax paid on goods or services exported out of India

…

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(10) The persons claiming a refund of integrated tax paid on exports of goods or services should not have -

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(a) received supplies on which the benefit of the Government of India, Ministry of Finance Notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number GSR 1305(E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or Notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1320(E), dated the 23rd October, 2017 or Notification No.41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1321(E), dated the 23rd October, 2017 has been availed; or

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(b) availed the benefit under Notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1272(E), dated the 13th October, 2017 or Notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1299(E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.

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[Explanation: For this subrule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.]"

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The Provisions of Rule 96(10) were omitted vide Notification No. 20/2024 – Central Tax dated 08-10-2024 w.e.f. 08-10-2024.

3. Contention of the Petitioner:

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The Petitioner contended that:

• Although the proceedings were initiated and the show cause Notice was issued and served on the Petitioner within the validity of the said rules, however, before the final order came into existence, rule 96(10) of the CGST Rules stood omitted.
• Further, as per Apex Court in the matter of Kolhapur Canesugar Works Ltd. & Anr., v. Union of India & Ors., reported in (2000) 2 SCC 536 has held that once a rule is omitted, ordinarily as a consequence thereof, the provision is to be obliterated from the statute book as completely as if it had never been passed, and the statute must be considered as if the rule had never existed.
• The Proceedings through SCN were initiated based on the allegation of contravention of provisions of Section 96(10) of CGST Rules.
• Once the Rule is omitted w.e.f. 08.10.2024, the proceeding initiated by the respondents could not have been continued further.
• Accordingly, the Impugned order is liable to be set aside.

4. Contention of the Respondent

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The Respondent contended that:

• At the time of issuance of SCN, Rule 96(10) was in existence.
• Therefore, deletion of Rule 96 (10) w.e.f. 08.10.2024 would operate prospectively, where proceedings initiated during the subsistence of the rule would continue to be governed by the said rules.

5. Findings and Analysis by the Hon’ble High Court

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Hon’ble High Court made the following Findings and Analysis:

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• Since Rule 96(10) has already been held ultra vires by the Hon’ble High Court of Kerala and has been subsequently deleted, therefore, it would be of no use to declare the same again ultra vires Section 16 of the CGST Act.

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• Further, the next question for consideration is whether the Respondent is competent to pass an order after the omission of such a Rule. In the given case, Rule 96(10) got omitted w.e.f. 08.10.2024, and the impugned order was issued on 30.01.2025.

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• In the matter of Kolhapur Canesugar Works Ltd. (supra), it was held that the effect of omission of the rule is different from the effect of substitution of a rule and the effect of amendment of a statute, which is saved by a saving clause.

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• In case of omission of a rule, if a provision of a statute is omitted unconditionally without a saving clause in favour of a pending proceeding, all actions must stop where the omission finds them, and if the final relief has not been granted before the omission goes into effect, it cannot be granted afterwards.

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• Thus, the operation of repeal or deletion as to the future and past largely depend upon the savings clause.

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• Similarly, if a new provision is inserted in place of the old provision without the saving clause in favour of the pending proceedings, then it can be reasonably inferred that the legislature intends that the pending proceedings shall not continue but fresh proceedings shall be initiated under the new provision.

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• In the given case, no new rule has been incorporated in place of Rule 96(10) of CGST Rules. Rather, Rule 96(10) has itself been omitted without any saving clause, at least the parties at this stage have not been able to show anything to the contrary.

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• Considering the absence of saving clause in favour of the pending proceedings, all actions from the date of such omission of the rule must stop.

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• Accordingly, there is no scope for the Respondent to pass any order by invoking the provisions of rule 96(10) of the CGST Rule, 2017, after the same was omitted on 08.10.2024 without a saving clause in favour of the pending proceeding. 

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Final Order

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Rule 96(10) has been omitted in the given case

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• There is no scope for the Respondent to pass any order by invoking the provisions of rule 96(10) of CGST Rule, 201,7, after the same was omitted on 08.10.2024 without a saving clause in favour of the pending proceeding. 
• Accordingly, the writ petition is allowed, and the impugned order is set aside.

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