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of <h1>Tax authorities cannot pass orders under Rule 96(10) CGST Rules after its omission without saving clause</h1> <h3>M/s Sri Sai Vishwas Polymers Versus Union of India and Another</h3> M/s Sri Sai Vishwas Polymers Versus Union of India and Another - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:(a) Whether Rule 96(10) of the Central Goods and Services Tax Rules, 2017 (CGST Rules), which regulates the conditions for claiming refund of integrated tax paid on exports, is ultra vires Section 16 of the Integrated Goods and Services Tax Act, 2017 (IGST Act) read with Section 54 of the CGST Act, 2017;(b) Whether the proceedings initiated under Rule 96(10) of the CGST Rules, including the show-cause notice and subsequent order demanding recovery of alleged inadmissible refund, can be sustained after the omission of Rule 96(10) from the statute book;(c) Whether the respondent authority was competent to pass the impugned order dated 03.02.2025 invoking Rule 96(10) after its omission on 08.10.2024;(d) The legal effect of omission of a rule without a saving clause on pending proceedings initiated under that rule.2. ISSUE-WISE DETAILED ANALYSISIssue (a): Validity of Rule 96(10) of the CGST Rules vis-`a-vis Sections 16 of IGST Act and 54 of CGST ActThe petitioner challenged Rule 96(10) of the CGST Rules as being ultra vires the statutory provisions governing input tax credit and refund claims under the IGST and CGST Acts. Rule 96(10) imposes conditions on persons claiming refund of integrated tax paid on exports, including restrictions on availing certain benefits under notifications issued by the Ministry of Finance.The Court noted that Rule 96(10) had already been declared ultra vires by the Hon'ble High Court of Kerala in Sance Laboratories Pvt. Ltd. v. Union of India, 2024 (91) G.S.T.L. 245 (Ker.), and subsequently omitted by Notification No. 20/2024-Central Tax dated 08.10.2024. Therefore, the Court found it unnecessary to re-examine the ultra vires challenge and held that the petitioner's prayer to declare Rule 96(10) ultra vires did not survive.Issue (b): Continuation of proceedings initiated under Rule 96(10) after its omissionThe petitioner contended that since Rule 96(10) was omitted from the statute book before the final order was passed, the proceedings initiated under it could not be continued. Reliance was placed on the Supreme Court judgment in Kolhapur Canesugar Works Ltd. v. Union of India, which held that omission of a statutory provision without a saving clause obliterates it from the statute book as if it never existed, and pending proceedings under such provision must cease.The petitioner also relied on decisions from other High Courts supporting the proposition that omission of a rule without a saving clause terminates pending proceedings based on that rule.The respondent argued that since the show-cause notice was issued while Rule 96(10) was in force, the omission would operate prospectively and pending proceedings could continue.The Court analyzed the legal effect of omission of a rule, distinguishing it from repeal or substitution of a statute. It noted that Section 6 of the General Clauses Act, 1897, which provides saving for pending proceedings on repeal of enactments, does not apply to omission of subordinate rules. The Supreme Court in Kolhapur Canesugar Works Ltd. clarified that omission without a saving clause requires all pending actions to stop, and relief not granted before omission cannot be granted thereafter.Since Rule 96(10) was omitted unconditionally without any saving clause protecting pending proceedings, the Court held that all actions under it must cease from the date of omission.Issue (c): Competence of respondent to pass order under omitted Rule 96(10)The impugned order was passed on 03.02.2025, after Rule 96(10) was omitted on 08.10.2024. The Court examined whether the respondent had jurisdiction to pass the order invoking a rule no longer in force.Applying the principles from Kolhapur Canesugar Works Ltd., the Court concluded that since the rule was omitted without any saving clause, the respondent had no authority to pass an order based on the omitted rule. The omission extinguished the legal basis for the proceedings and any subsequent orders.Issue (d): Effect of omission of a rule without saving clause on pending proceedingsThe Court emphasized the distinction between omission and repeal or substitution. Omission of a subordinate rule without a saving clause results in complete obliteration of that provision from the statute book, and pending proceedings under it must stop immediately.The Court found no indication of any saving clause in the case at hand. Therefore, the proceedings initiated under Rule 96(10) could not be continued, and the impugned order passed after omission was invalid.3. SIGNIFICANT HOLDINGSThe Court held:'If, however, a provision of a statute is unconditionally omitted 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.''The operation of repeal or deletion as to the future and past largely depend upon the savings applicable. In a case where a particular provision is omitted and in its place another provision dealing with the same contingency is introduced without the saving clause in favour of the pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision.''Having regard thereto, in our view, the said provision of rule 96 (10) of CGST Rule, 2017 being omitted unconditionally, without a saving clause in favour of the pending proceedings, all actions from the date of such omission of the rule must stop.''We find that there was no scope for the respondent no. 2 to pass any order by invoking the provisions of rule 96 (10) of CGST Rule, 2017 after the same was omitted on 8th October, 2024 without a saving clause in favour of the pending proceeding.'Accordingly, the Court allowed the writ petition and set aside the impugned order dated 03.02.2025, holding that the proceedings and order passed under the omitted Rule 96(10) were without jurisdiction and invalid.
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