TaxTMI 
TaxTMI 
Unconditional Omission of Rule 96(10) - Why Pending GST Proceedings Cannot Survive
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....nconditional Omission of Rule 96(10) - Why Pending GST Proceedings Cannot Survive<br>By: - Raj Jaggi<br>Goods and Services Tax - GST<br>Dated:- 16-9-2026<br>Rule 96(10) Is Gone - But What Happens to Pending Proceedings? Rule 96(10) of the CGST Rules, 2017 has been a continuing source of controversy for exporters. The provision restricted the refund of integrated tax paid on exports in specified situations where the exporter or its supplier had availed certain concessional benefits. Apart from disputes concerning the interpretation and operation of the Rule itself, its eventual omission gave rise to an even more fundamental question: what happens to proceedings already initiated under a rule that has subsequently been omitted unconditiona....
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....lly, without any saving clause preserving pending actions? The Calcutta High Court addressed this question in M/s. KSE Electricals Private Limited & Anr. Versus The Additional Commissioner Kolkata South CGST & CX Commissionerate, GST Bhawan & Ors. - 2026 (9) TMI 636 - CALCUTTA HIGH COURT . The judgment is brief-only four pages-but the principle it applies has much wider significance. The Court applied the law settled by the Supreme Court in M/s Goodluck India Limited & Anr. Versus Union of India & Ors. - 2026 (8) TMI 719 - Supreme Court and quashed a Show Cause Notice under Section 74, together with consequential orders, because the entire proceedings were founded upon Rule 96(10), which had meanwhile been omitted wit....
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....hout any saving clause. The judgment is therefore important not because it develops an entirely new principle, but because it demonstrates the practical consequence of unconditional omission. A provision may have existed during the tax period, and proceedings may even have been initiated while it remained on the statute book. Yet, if that provision is subsequently omitted without preserving pending proceedings, the question is whether those proceedings retain any legal foundation. KSE Electricals answers that question under Rule 96(10). From a Rule 96(10) Demand to a Fundamental Question of Statutory Survival The proceedings against the petitioners related to the period from July 2017 to March 2022. A Show Cause Notice dated 25.07.....
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....2024 was issued under Section 74 of the CGST Act, alleging contravention of Rule 96(10). At the time of issuance, Rule 96(10) was still part of the CGST Rules, 2017. However, the legal landscape changed during the pendency of those proceedings. By Notification No. 20/2024- Central Tax, dated 08.10.2024, Rule 96(10) was omitted with effect from 08.10.2024. The significance lies not merely in the fact of omission but in the manner in which it was effected. The omission was unconditional. It was not accompanied by any saving clause declaring that actions already taken, liabilities already incurred, notices already issued, or proceedings already pending under Rule 96(10) would continue notwithstanding its omission. Despite this, consequentia....
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....l orders dated 04.02.2025 were subsequently passed on the basis of the earlier Show Cause Notice. This chronology transformed the nature of the dispute. The central question was no longer merely whether the petitioners had violated Rule 96(10) during the period when it existed. The anterior question was whether the Department could continue to adjudicate and enforce a proceeding whose sole substantive foundation had ceased to exist without any legislative provision preserving pending proceedings. This distinction is crucial. A tax proceeding requires not only procedural machinery but also a continuing legal foundation for the liability it seeks to enforce. Section 74 may provide the machinery for determining tax in cases involving fra....
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....ud, wilful misstatement, or suppression of facts, but it does not itself recreate a substantive restriction that has disappeared from the Rules. Therefore, where the very basis of the proposed demand is exclusively Rule 96(10), the mere fact that Section 74 had already been invoked cannot, by itself, answer the question whether the proceeding survives the omission. The Department's position was that the authorities acted in accordance with the law prevailing at the relevant time. That proposition may explain why proceedings were originally initiated, but it does not resolve the separate question of their continuance after 08.10.2024. Valid initiation and lawful continuation are conceptually distinct. A proceeding may have been validl....
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....y commenced under the law then in force and yet become incapable of continuation if the provision supporting it is subsequently omitted and the legislature does not save pending proceedings. Unconditional Omission and the Saving of Pending Proceedings - The Real Legal Issue The expression "omitted without a saving clause" carries greater legal significance than may appear at first glance. Whenever a statutory provision is repealed, omitted or substituted, two questions arise. First, what is the law for transactions occurring after the change? Secondly, what happens to rights, liabilities and proceedings arising under the earlier provision that have not yet attained finality? The second question is governed by the law on saving accr....
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....ued rights and pending proceedings. A legislature or rule- making authority can expressly provide that, notwithstanding repeal or omission, specified past liabilities and pending proceedings shall continue as though the earlier provision remained in force. Such a clause provides the legal bridge between the old provision and pending matters. The difficulty arises where that bridge is absent. The petitioners relied on M/s Goodluck India Limited & Anr. Versus Union of India & Ors. - 2026 (8) TMI 719 - Supreme Court​​​​​​​. The Supreme Court, drawing on the Constitution Bench ruling in KOLHAPUR CANESUGAR WORKS LTD. Versus UNION OF INDIA - 2000 (2) TMI 823 - Supreme Court, treated the absen....
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....ce of a saving clause as legally significant. The principle relied on was that where a provision is omitted without a saving clause, it ceases to exist in the eye of the law, and proceedings founded upon it cannot thereafter be initiated or continued. This principle is particularly important in the case of delegated legislation. Rule 96(10) was not a provision of the CGST Act itself; it was contained in the CGST Rules. Therefore, the legal consequence of its omission cannot be answered merely by assuming that every past liability survives every legislative change. The existence of an appropriate saving provision becomes critical. The deeper point is that retrospectivity and the survival of pending proceedings are not necessarily the s....
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....ame question. Saying that the omission took effect from 08.10.2024 does not, by itself, establish that Rule 96(10) continues to govern pending proceedings concerning earlier tax periods. The effective date tells us when the Rule ceased to operate. Whether pending proceedings survive thereafter requires a separate legal basis for their preservation. This explains why the fact that the proceedings in KSE Electricals related to July 2017 to March 2022 was not decisive. Nor was it sufficient that the Show Cause Notice had already been issued on 25.07.2024. The decisive question was whether, after 08.10.2024, any legal device remained to preserve the operation of Rule 96(10) for that pending proceeding. The answer was in the negative. Pend....
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....ing Proceedings Cannot Survive an Unconditional Omission Without a Saving Clause The Supreme Court ruling in Goodluck India is the central authority behind KSE Electricals. The decisive question is not merely whether Rule 96(10) existed when the exports were made, but whether proceedings founded upon that Rule could continue after its unconditional omission. Since the Rule was omitted without any saving or sunset clause, pending proceedings were not preserved. The judicial development is clear. Messrs Addwrap Packaging Pvt. Ltd. & Anr. Versus Union Of India & Ors. - 2025 (6) TMI 1156 - GUJARAT HIGH COURT laid the foundation; M/s Goodluck India Limited & Anr. Versus Union of India & Ors. - 2026 (8) TMI 719 - Supreme CourtR....
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....03;​​​​​​ affirmed the governing principle; and KSE Electricals applied it to a pending Section 74 proceeding. Thus, where the demand rests solely upon Rule 96(10), the fundamental question is whether any statutory foundation for continuing the proceeding survives after the Rule's unconditional omission. Section 74 Cannot Preserve a Demand After Its Substantive Foundation Has Disappeared Section 74 provides the machinery for determining tax liability in specified circumstances; it does not independently create the substantive liability sought to be enforced. Therefore, where a demand is founded solely on Rule 96(10), invoking Section 74 cannot preserve the proceeding after the Rule has been unco....
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....nditionally omitted without saving pending proceedings. In KSE Electricals, Rule 96(10) was the sole foundation of the proceedings. Once that foundation disappeared, neither the Show Cause Notice dated 25.07.2024 nor the consequential orders dated 04.02.2025 could survive. However, the principle should not be extended to cases involving independent allegations under other provisions of the CGST Act or Rules; in such cases, each allegation would have to be examined on its own legal foundation. Thus, the ruling lays down a narrow but important principle: a machinery provision such as Section 74 cannot keep alive a demand when the sole substantive provision supporting that demand no longer survives for pending proceedings. Pending Pro....
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....ceedings Must Be Tested Against Their Surviving Statutory Foundation The CBIC Office Memorandum dated 24.08.2026 directed field formations not to initiate or pursue proceedings founded on the omitted Rule 96(10). It thus translated the judicial position on unconditional omission into departmental practice and was also relied upon by the petitioners in KSE Electricals. For pending matters, however, the mere omission of Rule 96(10) is not sufficient. The real test is whether the impugned demand is founded solely on Rule 96(10) and whether any saving clause or independent statutory provision preserves the proceedings after its omission. Accordingly, the legal foundation of each demand must be examined. Where Rule 96(10) is the sole ba....
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....sis and no saving provision applies, the proceeding cannot continue; where an independent statutory basis exists, its sustainability must be examined separately. The issue therefore turns on the surviving legal foundation of the demand, rather than merely on the omission of Rule 96(10). Unconditionally Omitted Rule Cannot Sustain Pending Proceedings The Calcutta High Court gave direct effect to the unconditional omission of Rule 96(10). Since the Show Cause Notice dated 25.07.2024 and the consequential orders dated 04.02.2025 were founded solely on that Rule, they could not survive and were quashed and set aside. The ruling therefore reinforces a precise principle: the earlier existence of Rule 96(10), or even the initiation of pro....
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....ceedings while it was in force, cannot preserve pending proceedings when the Rule has subsequently been omitted without a saving clause. *** =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....