TaxTMI 
TaxTMI 
2026 (8) TMI 1367
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....entral Goods and Services Tax Rules, 2017 (as amended vide Notification No.54/2018 - CT dated 09.10.2018), is ultra vires Articles 14, 19 (1)(g) and 265 of the Constitution of India, and also ultra vires Section 16 of the IGST, 2017, and thereby strike down the said Rule as unconstitutional and unenforceable; The copy of provision is filed and marked as Annexure-G. (iii) Issue a writ of Mandamus directing the Respondents to consider the Petitioner's reply dated 25.02.2025 in accordance with law and pass a reasoned and speaking order, the copy of which is at Annexure-Y; (iv) Direct the Respondents to consider the Petitioner's reassessment request for IGST on imports and payment of applicable interest in accordance with the new legal framework, particularly in light of the CBIC Circulars the copy of which is at Annexure-AA and Annexure-AB, respectively and the relevant judicial precedents, and to process the refund claims accordingly. (v) Issue any other appropriate writ, order or direction as this Hon'ble Court may deem fit to grant in the circumstances of the case, in the interest of justice." 2. Heard learned counsel for the petitioner, learned DSGI f....
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....d my attention to the impugned Show Cause Notice dated 07.10.2020 issued by respondent No.5 in order to point out that the said Show Cause Notice was issued pursuant to the Notification dated 09.10.2018 under which, Rule 96(10) was inserted into the CGST Act by way of amendment w.e.f. 23.10.2017. It is submitted that the validity of the said Notification was challenged before the Kerala High Court in the case of Sance Laboratories Private Limited V. Union of India - (2024) 23 Centax 435 (Ker.) wherein the said Rule 96(10) was struck down as unconstitutional vide order dated 10.10.2024. It is submitted that prior to the striking down of the said Rule 96(10) on 10.10.2024, the respondent had already omitted the said Rule by issuing a Notification dated 08.10.2024, which was noticed by the Kerala High Court in the said order, which proceeded to declare that all proceedings between 23.10.2017 and 08.10.2024 would stand abated and deserve to be quashed. 4. It is submitted that the aforesaid judgment of the Kerala High Court has been subsequently followed by the other High Courts including the Uttarakhand High Court, Gujarat High Court, Delhi High Court and Bombay High Court in ....
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....ces. Note: This payment of tax is essentially from the accumulated ITC, which is a basket of ITC availed on inputs, input services and capital goods with no one-to-one correlation between the usage of inputs and usage of credit so long as the inputs satisfy the requirements under Section 16(1) of the CGST Act 3. Procedure i. Section 54(4) of the CGST Act provides that the refund application must be accompanied with the documents specified in Rule 89(2), in Annexure 1 of the Form GST RFD-01 to establish that refund is due to the applicant. ii. Rule 89(1) provides that an application in Form GST RFD- 01 must be fled along with the necessary documents through the common portal for claiming refund of unutilized ITC. iii. Refund to be calculated as per the formula provided in Rule 89(4), which is: Refund=(Turnover of zero-rated supply of goods and services) x Net ITC / Adjusted Total Turnover. Note: (a). Net ITC is defined as "ITC availed on inputs and input services during the relevant period." (b). The above definition refers to ITC availed on inputs and input services availed during the relevant period which is the period for which the claim has be....
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....tion and indicate the date of fling and time period remaining to file an order under Section 54(7) of the CGST Act. ii. Section 54(6) of the CGST Act provides that, in case of zero-rated supplies, 90% of the total refund amount claimed shall be refunded on a provisional basis. 6. Processing of refund and sanction, therein Section 54(7) of the CGST Act provides that, a refund order must be issued by a proper officer within 60 days from the date of receipt of the refund application. In terms of Rule 92, if the proper officer is satisfied that the refund amount is due and payable to the applicant, shall make an order in Form GST RFD-06 sanctioning the amount of refund therein, and subsequently issue a payment order in Form GST RFD-05 for the amount so sanctioned. Rule 96(3) provides that the claim of refund of export of goods shall be processed by a proper officer and an amount equal to the IGST paid shall be electronically credited to the bank account of the applicant. After the amendment in Rule 96 of the CGST Rules -Insertion of Rule 96(10) and substitution of Rule 89(4A) and (4B):- SI.No Rule 89 Rule 96 1. Refund of unutilized ITC shall be....
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....s), except so far as it relates to receipt of capital goods against Export Promotion Capital Goods (EPCG) Scheme; ◆. Notification No. 40/2017-CT(R) dated 23.10.2017 (reduced rate of tax -merchant exporters; or ◆. Notification No. 41/2017-IT(R) dated 23.10.2017 (reduced rate of tax - merchant exporters). 3. Under clause (b) of Rule 89(4B) In case the applicant has availed the benefit of Notification No. 78/2017-Cus dated 13.10.2017 or Notification No. 79/2017-Cus dated 13.10.2017 (nil rate of duty - export benefit under Customs), refund of ITC availed in respect of "other inputs and input services" to the extent used in making export of goods, shall be granted. Note: The ITC is only of the inputs and input services used in making export of goods with a one-to-one correlation with the export of goods unlike Rule 89(4). Rule 96(10)(ii) provides that "persons" claiming refund of IGST on export of goods or services, should not have availed benefit of the Notification No. 78/2017-Cus dated 13.10.2017 or Notification No. 79/2017-Cus dated 13.10.2017 (nil rate of duty - export benefit under Customs), except so far as it relates to receipt of capita....
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....rovision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature...." The above comparative table clearly indicates that the working of Rule 96(10) of the CGST Rules as presently worded creates a restriction not contemplated by Section 16 of the IGST Act, on the right to refund. Therefore, I am constrained to hold that Rule 96(10) of the CGST Rules as presently worded is ultra vires the provisions of Section 16 of the IGST Act, it is 'manifestly arbitrary' as the term is to be understood in the light of the law laid down in Shayara Bano (supra) and the provision as it stands today produces absurd results, not intended by the Legislature. 15. After this judgment was dictated (to the above extent), it was brought to my notice by the learned Standing Counsel appearing for Central Revenue that the problems associated with the working of Rule 96(10) of the CGST Rules are engaging the attention of the GST Council. Today, when these writ petitions are taken up ....
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....le their replies in response to such notices within a period of two weeks from the date of receipt of a certified copy of this judgment and all issues other than those arising out of the application of Rule 96(10) of the CGST Rules shall be adjudicated by the proper officer." 7. The said judgment of the Kerala High Court was taken note of by the Uttarakhand High Court in the case of M/s. Sri Sai Vishwas Polymers Vs. Union of India and another - 2025-VIL-491-UTR, wherein it is held as under: "7. Heard learned counsel for the parties, since the Rule 96 (10) of CGST Rule, 2017 have been declared ultra vires by the Hon'ble High Court of Kerala in Sance Laboratories Pvt. Ltd. Vs. Union of India, reported in 2024 (91) G.S.T.L. 245 (Ker.) - 2024-VIL-1160-KER and have subsequently been deleted vide Notification No.20/2024-Central Tax, dated 08.10.2024, therefore, it would be fruitless to again declare Rule 96 (10) of CGST Rule, 2017 as ultra vires the provisions of Section 16 of the IGST Act, therefore, the prayer no.1 does not service any more. 8. The next question that falls for consideration in the instant case is whether respondent no. 2 was at all compet....
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.... 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. Having regard thereto, 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. Having regard to the above observations, we deem it appropriate to allow the writ petition and set aside the order dated 03.02.2025 passed by respondent no.2. 11. Accordingly, the writ petition is allowed and the impugned order dated 03.02.2025 passed by respondent no.2 is set aside." 8. So also, the Gujarat High Court in the case of Addwrap Packaging Pvt. Ltd., Vs. Union of India - (2025) 31 Centax 274 (Guj.) followed the judgment of the Kerala High Court and has held as under: "198. In view of the above decision rendered by the Apex Court, "omission" would be included in the interpretation of word "repeal" and hence omission of Rule 96(10) with effect from 8th October, 2024, would amount to repeal without any saving c....
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....it matters little whether this is done expressly or inferentially or by the enactment of repugnant legislation. If such is the basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to legislature then the same would, in our opinion, attract the incident of the saving found in Sec. 6 for the rules of construction embodied in the General Clauses Act which are, so to speak, the basic assumptions on which statutes are drafted." 199. Decision of the Hon'ble Apex Court in case of Mathew M. Thomas and others v. Commissioner of Income Tax (supra) would be applicable to the facts of the present case wherein it is held as under: "4. The Full Bench opined that the Circular was not applicable to the case on hand as the acquisition proceedings were over by the order of the Competent Authority passed on 31.3.1981. The Full Bench obse....
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....g clause, preventing the retroactive operation of the repeal and continuing the repealed law in force as to all pending prosecutions, and often as to all violations of the existing law already committed." 202. The author then proceeds to quote the following passage from Wall v. Chesapeake & Ohio Ry., Company reported in 1919 (125) 120 III: "It is well settled that if a statute giving a special remedy is repealed without a saving clause in favour of pending suits all suits must stop where the repeal finds them. If final relief has not been granted before the repeal went into effect, it cannot be after. If a case is appealed, and pending the appeal the law is changed, the appellate court must dispose of the case under the law in force when its decision was rendered. The effect of the repeal is to obliterate the statute repealed as completely as if it bad never been passed, and it must be considered as a law which never existed, except for the purposes of those actions or suits which were commenced, prosecuted and concluded while it was an existing law. Pending judicial proceedings based upon a statute cannot proceed after its repeal. This rule holds true until the p....
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.... to be carried forward and petitioners would be entitled to maintain refund claims of IGST paid on export of goods. 207. In view of above findings, as Rule 96(10) would not be applicable to the pending proceedings, in view of omission of Rule 96(10) by Notification No.20/2024 with effect from 8th October, 2024, the question of challenge to the vires and validity of rule 96(10) is not required to be considered at this stage. 208. The petitions therefore succeed in view of applicability of Notification No.20/2024 whereby Rule 96(10) is omitted and the said Notification would be applicable to all the pending proceedings/cases as on 8th October, 2024. The impugned show cause notices and the orders-in-original are therefore, quashed and set aside. The petitioners are therefore, entitled to maintain refund claims for IGST paid for the export of goods as per Rule 96 of the CGST Rules, 2017 in accordance with law." 9. Subsequently, in the petitioner's own case in the case Hikal Ltd. Vs. Union of India - (2025) 34 Centax 249 (Bom.), the Bombay High Court has held as under: "47. In this batch of Petitions, for reasons that we will discuss elaborately herea....
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....), would have effect throughout the territory of India. Therefore, the Family Court at Bandra, Maharashtra, could not have ignored the striking down of Section 10-A (1) of the Divorce Act by the Kerala High Court, on the ground that such a decision was not binding upon the Courts and Authorities in the State of Maharashtra. 52. In Commissioner of Income-Tax, Vidarbha (supra), another Coordinate Bench of this Court, comprising Kantawala, CJ and Chandurkar, J (as His Lordship then was), rejected the contention that the striking down of Section 140- A(3) of the Income Tax Act by the Madras High Court in the case of A.M. Sali Maricar And Anr. Vs Income-Tax Officer And Anr [(1973) 90 ITR 116] was not binding upon the Income Tax Authorities or the Income Tax Tribunals in the State of Maharashtra. The Coordinate Bench held that the Income Tax Act was an all- India statute. If an Income Tax Tribunal in Madras was bound by the decision in A.M. Sali Maricar (supra), then, in the absence of any contrary decision given by any other competent High Court, binding on the authorities and tribunals in the State of Maharashtra, such authorities and tribunals in the State of Maharashtra must....
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....d provision from the statute book or rule book would apply. The Respondents admit the omission or repeal but contend that the common law rule would not apply because pending proceedings have been expressly saved." xxxxx "65. Thus, subject to further discussion on whether this is a case of omission or repeal backed by any savings clauses, it is evident that an omission or a repeal without any savings clauses would lapse the impugned proceedings or orders unless they qualify as "transactions past and closed". 66. In these matters, not even an attempt was made by the learned Counsel for the Respondents to contend that the impugned show cause notices or for that matter, the orders challenged in these Petitions, were covered by the expression "transactions past and closed". In cases where the show cause notices did not culminate in any orders, obviously, the transaction is not covered by the expression. Not only do such show cause notices become vulnerable, but even the orders made after the date of omission or repeal, i.e. after 08 October 2024, become vulnerable. The show cause notices could not have proceeded any further post the repeal or omission of the i....
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.... alleged violation of the requirements of the impugned rules. There are no other allegations, as was asserted by the learned counsel for the Petitioners and not disputed by the learned counsel for the respondents, though a specific opportunity was granted to them. Therefore, if the impugned rules are omitted or repealed without any savings clauses or the protection of Section 6 of the General Clauses Act, nothing would survive in such notices. Such notices cannot be saved based on the argument now advanced." xxxxx "122. Upon comprehensive review of all the above aspects, we hold that, following the omission or repeal of the impugned Rules, i.e., Rules 89(4B) and 96(10) of the CGST Rules via Notification dated 08 October 2024, and in the absence of any saving clauses or the benefit of Section 6 of the General Clauses Act, all pending proceedings-such as indisposed show cause notices, orders disposing of show cause notices issued after 08 October 2024, or even orders made before 08 October 2024 but not yet finalised due to appeals before the Appellate Authorities or challenges before this Court, thus not constituting "transactions past and closed"-are not preserved ....
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....g SCNs, orders and even appeals filed against orders would not be transactions passed and closed and therefore, the proceedings cannot continue under Rule 96(10) of the CGST rules. 19. Applying the above legal principles to the facts and circumstances of the present writ petitions, the following observations are made: (i) In W.P. (C) 3154/2023, the case is only at the stage of summons and therefore the proceedings deserve to be quashed including the summons. Thus, no proceedings can continue under Rule 96(10) of the CGST rules against the Petitioner. (ii) In W.P. (C) 10687/2023, the SCN and all subsequent orders emanating therefrom which were passed in the said matter shall also stand quashed. Moreover, as the Petitioner is already in the process of filing the appeal against the order and the additional 10% pre-deposit has already been made by the Petitioner. (iii) In W.P.(C) 3165/2023, the SCN and proceedings emanating from the SCN stand quashed." 11. In view of the aforesaid facts and circumstances and striking down of Rule 96(10) of the CGST Act and the judgments of the Kerala High Court and other High Courts including Bombay High Cou....