The Tale of Hikal Limited and the Vanishing INDIA GST Tax Rule 96(10)

Imagine a bustling port town in India, where ships loaded with goods like textiles, medicines, and machinery set sail to distant lands. In this town lived a group of exporters, business owners like Hikal, who sent their products abroad to earn a living. They worked hard, but a pesky tax rule called Rule 96(10) was like a storm cloud over their heads. On September 11, 2025, the Bombay High Court, like a wise village elder, stepped in to clear the skies. In Hikal Limited, Yasho Industries Limited, Prashi Pharma Private Limited, M/s. Alkem Laboratories Ltd., Undercarriage and Tractor Parts Pvt Ltd., Nevatia Steel & Alloys Pvt. Ltd., Nikhil Nevatia, Augmont Enterprises Pvt. Ltd., Bharat Wire Ropes Limited, Murarilal Ramsukh Mittal, Kairav Chemofarbe Industries Limited, Kalp Overseas, Camlin Fine Sciences Limited, DD Cotton Pvt. Ltd., Mr. Mayank Arun Sekhsaria, Tridev Resins India Private Limited, Astec LifeSciences Limited, Versus Union of India, Central Board of Indirect Taxes and Customs Ministry of Finance, Office of the Commissioner, CGST and Central Excise, Navi Mumbai, The GST Council, Joint Commissioner (Adjudication), The Assistant Commissioner CGST & C. Ex. Division – I Belapur Commissionerate. - 2025 (9) TMI 806 - BOMBAY HIGH COURT, the court told a story of fairness that every exporter and anyone curious about taxes, can cheer for. Let’s dive into this tale, as simple as a bedtime story, to understand what happened.

The New Tax Town: GST Arrives

Back in July 2017, India welcomed a shiny new tax system called the Goods and Services Tax (GST). It was like building a new marketplace where all traders could work under one set of rules. For exporters like Hikal, who sent goods overseas, GST promised smooth sailing. They had two ways to avoid paying heavy taxes upfront:

Ship without paying tax and later get a refund for taxes paid on raw materials (called Input Tax Credit, or ITC).

Pay a tax called IGST when shipping, then get that money back quickly as a refund.

Option 2 was a favorite. It was like paying for a boat ticket and getting the money back right after the trip, keeping their wallets full for the next journey.

The Trouble with Rule 96(10)

But in October 2017, a new rule, Rule 96(10) rolled into town like an uninvited guest. It told exporters using special government schemes (like Advance Authorization, EPCG, or 100% Export-Oriented Units) that they couldn’t use Option 2. These schemes let them import materials without paying duties, a bit like getting free wood to build their ships. Now, Rule 96(10) forced them to use Option 1, which meant waiting longer for refunds. Their money was stuck, like ships caught in a storm.

Exporters were furious. They shouted, “The GST law promises we can get our IGST refunds! Why is this rule blocking us?” They felt it was unfair, like punishing them for using the government’s own schemes. Some even said it hurt India’s dream of being a global trade leader. Across the land, from Kerala to Gujarat, exporters took their complaints to courts. In Kerala, a court even declared Rule 96(10) “unfair” and tossed it out.

The Rule Disappears, But Questions Remain

Fast forward to October 8, 2024. The government, perhaps tired of the uproar, decided to erase Rule 96(10) with a new announcement (Notification No. 27/2024-Central Tax). It was like tearing down a broken bridge that nobody liked. But here’s the twist: they didn’t leave any instructions about what to do with the old fights—cases where exporters like Hikal were still battling tax officials over Rule 96(10). These fights included “show-cause notices” (like warning letters from tax officers), ongoing hearings, and appeals.

Hikal and other exporters asked, “What happens to our cases now? Are we free, or will the tax officers keep chasing us?” The Bombay High Court stepped in to settle this once and for all, answering eight big questions like a wise storyteller untangling a knot.

The Court’s Eight Answers: A Path to Clarity

Question 1: Was Rule 96(10) Against the Law (parent act)?

Hikal argued the rule was like a bully breaking the GST law’s promises. The court said, “Since the rule is gone, we don’t need to decide if it was bad. You’re free anyway.” It was like saying, “The storm’s over, so let’s not argue about who started it.”

Example: Hikal’s friend, Priya, who runs Priya Textiles, had a case saying Rule 96(10) was unfair. The court didn’t need to rule on fairness, she won because the rule vanished.

Question 2: What Happens When a Rule Disappears Without Instructions?

The court declared, “When a rule is erased without a ‘savings clause’ a note to keep old cases alive, it’s like it never existed. All ongoing fights stop.” It’s as if the tax officers’ warning letters turned to dust.

Example: Raj, who exports medicines, got a warning letter in 2023. His case was still in court when the rule was erased. The court said, “Raj, your fight is over. Go back to work.”

Question 3: What About Old, Finished Cases?

The court said, “If a case was fully settled, like someone paid a fine and didn’t fight back, it stays closed. But if it’s still going, it stops now.”

Example: Meena, an exporter, paid a fine in 2022 and moved on. Her case stays closed. But her cousin Anil, who was appealing a fine, gets to walk away free.

Question 4: Can an Old Law Save the Tax Officers?

The tax officers said, “An old law called Section 6 of the General Clauses Act lets us keep fighting.” The court shook its head: “That law only works for big laws, not small rules like this one.”

Example: Tax officers chased Sanjay, an exporter, with a 2024 notice. They claimed the old law saved them. The court said, “No, Sanjay’s case is gone.”

Question 5: Are Rules Like Big Laws?

The officers tried another trick: “Since Rule 96(10) comes from the GST law, it’s like a big law!” The court laughed, “Rules are helpers, not kings. They don’t get special protection.”

Example: Like Sanjay, exporter Geeta’s case was dropped because rules aren’t big enough to keep fights alive.

Question 6: Does Another GST Rule Help?

The officers pointed to Section 174(3) of the GST law, saying it saves old cases. The court said, “That’s for old tax systems, not this rule. Nice try.”

Example: Exporter Vikram’s ongoing case from 2023? Tossed out, because this section doesn’t apply.

Question 7: Does the Announcement’s Date Save Old Cases?

The announcement said the rule was gone from October 8, 2024. The officers argued, “That means old cases stay!” The court replied, “No, that’s just a date, not a promise to keep fighting.”

Example: Exporter Nisha’s appeal from 2022? It’s over, no matter the date.

Question 8: What About Parliament’s Oversight?

Finally, the officers said, “Section 166 of the GST law saves us!” The court said, “That’s only if Parliament changes the rule. You erased it yourselves, so no luck.”

Example: Exporter Arjun’s case, stuck in court? It’s done, because Parliament didn’t touch this rule.

The Joyful Ending

The court’s ruling was like the sun breaking through the clouds. It agreed with other courts in Gujarat and Uttarakhand, saying all ongoing cases under Rule 96(10) were finished unless they were fully settled. The court noticed that the government had made 64 other announcements with instructions to keep old cases alive, but not this time. It seemed the government wanted to help exporters like Hikal by letting the rule fade away.

The court also said tax officers couldn’t start new fights under other GST rules, because their complaints were only about Rule 96(10). With the rule gone, their arguments collapsed like a house of cards.

What This Means for Our Exporters

For Hikal and friends, this was a big win. They could now:

1. Get Refunds Easily: No more waiting for money, they can use Option 2 again.
2. End Old Fights: If their case wasn’t finished, it’s over, no penalties.
3. Focus on Business: With cash flowing, they can build bigger ships and sail further.

A Lesson for All

This story isn’t just about taxes, it’s about fairness. The Bombay High Court acted like a wise elder, ensuring exporters weren’t punished for rules that no longer exist. It’s a reminder that laws should help, not hinder, those working hard to grow.

If you’re an exporter with an old Rule 96(10) case, check if it’s still open—you might be free! Talk to a tax expert to be sure. And who knows? The Supreme Court might write the next chapter if someone asks for a bigger ruling.

For now, Hikal and the exporters are back at the port, loading their ships with a smile, knowing the storm has passed. :-)   

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By Dr.Joshua Ebenezer, Principal Partner, NuCov FaciliTrade.