• Dated 23^rd May, 2025

IGST Refund Proceedings Quashed Post Omission of Rule 96(10): Uttarakhand High Court Reiterates Legal Effect of Rule Deletion Without Saving Clause

Background of the Case:

The petitioner is a registered manufacturer of gold bars and jewellery. It claimed a refund of Rs.1,05,25,755/- under IGST on account of zero-rated exports. A show cause notice dated 26.09.2023 was issued by the GST Department, alleging ineligibility under Rule 96(10) of the CGST Rules, 2017 due to availing certain concessional supply benefits. Despite submissions made during the adjudication process, the refund was rejected and recovery was ordered under Section 74(1) of the CGST Act vide order dated 03.02.2025. The petitioner challenged the said order in a writ petition before the Uttarakhand High Court.

Issue:

Whether proceedings initiated under Rule 96(10) of the CGST Rules could be continued and concluded after the rule was omitted on 08.10.2024, in the absence of a saving clause.

Contention of the Petitioner:

• Rule 96(10) was omitted from the statute without any saving clause via Notification No. 20/2024-Central Tax dated 08.10.2024.
• As per the Supreme Court's ruling in Kolhapur Canesugar Works Ltd. v. Union of India [(2000) 2 SCC 536], an omitted rule, unless preserved by a saving clause, ceases to exist for all legal purposes, including pending proceedings.
• Consequently, any action taken post-omission under Rule 96(10) was non est and without authority of law.

Contention of the Respondent:

• At the time of issuing the show cause notice, Rule 96(10) was in force; therefore, proceedings initiated were valid.
• The omission of the rule should be treated as prospective, allowing the continuation of already initiated proceedings.

Held:

• The High Court observed that Rule 96(10) had been declared ultra vires by the Kerala High Court and was subsequently deleted without any saving clause.
• Citing Kolhapur Canesugar, it held that in the absence of such a saving clause, all pending proceedings under an omitted rule must cease from the date of its deletion.
• Since no new provision replaced Rule 96(10), and no clause preserved existing proceedings, the impugned order passed after 08.10.2024 was invalid.
• The writ petition was allowed, and the order dated 03.02.2025 was set aside.

End Notes:

The Uttarakhand High Court's ruling makes it clear that when a legal provision such as Rule 96(10) of the CGST Rules is omitted without a saving clause, it ceases to have any legal effect, even on proceedings that were initiated while it was in force. The Court rightly held that no order can be passed under a non-existent rule, reinforcing the principle that procedural safeguards and legislative intent must be respected. This decision is significant for exporters and taxpayers facing refund disputes under GST, especially where earlier benefits or exemptions are questioned. It ensures that tax authorities cannot rely on a deleted provision to sustain demands or deny refunds. The judgment also serves as a caution to departments to align their actions with current law and avoid retroactive enforcement of repealed or omitted rules.

Case Reference: M/s Sri Sai Vishwas Polymers Versus Union of India and Another [Writ Petition (MB) No. 103 of 2025)]

Author: Debanjan Ranu

Edited by: Shaily Gupta