HC rules refund cannot be recovered for violation of Rule 96(10) after its omission

This Tax Alert summarizes a recent ruling of the Uttarakhand High Court (HC) ^[1]  on validity of ongoing proceedings under Rule 96(10) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) after its omission.

Rule 96(10) inter alia provides that a person cannot claim refund of integrated tax paid on export of goods or services if benefit of specified exemption notifications is availed. The said rule was omitted w.e.f. 8 October 2024.

Assessee, engaged in the manufacture of gold bar and jewellery, received a show cause notice on 26 September 2023, for recovery of incorrect refund of IGST in violation to Rule 96(10). The said demand was confirmed vide order dated 3 February 2025. Aggrieved, assessee challenged the order before HC, on the ground that it was issued after Rule 96(10) was omitted.

The key observations of the HC are:

• Supreme Court (SC) in case of Kolhapur Canesugar Works Ltd ^[2], held that the effect of omission of rule from the statute book is different from that of substitution of rule or the amendment of a statute which is saved by a saving clause. Section 6 of General Clauses Act, 1897 is not applicable to omission of a “rule”.
  If a provision of a statute is unconditionally omitted without a saving clause in favor 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.
  
  
• If a specific provision is omitted and replaced by another addressing the same situation without a saving clause for pending proceedings, it can be reasonably inferred that the Legislature intends for the pending proceedings to cease, allowing new proceedings for the same purpose to be initiated under the new provision.
  
  
• In the instant case, no new rule has been incorporated. On the contrary, Rule 96(10) has itself been omitted from the statute book without any saving clause. Accordingly, all actions from the date of such omission of the rule must stop.
  
  
• There was no scope for the authorities to pass any order by invoking the said rule after the same was omitted on 8 October 2024.

Basis above, HC allowed the writ petition and set aside the impugned order.

Comments:

• Rule 89(4A) and (4B) were also omitted along with Rule 96(10). In the past, Gujarat HC [TS-63-HC(GUJ)-2022-GST] had held that refund under Rule 89(4A)/(4B) cannot be calculated basis the formula provided in Rule 89(4) but as per the input/output ratio of inputs used in manufacture of exported goods. Businesses may have to evaluate the impact of the Gujarat HC ruling on the pending cases, in light of the ratio of this judgement.
  
  
• Calcutta HC has also granted interim stay for recovery of refund under Rule 96(10) in absence of any saving clause [WPA 3254 of 2025].
  
  
• Industry may examine applicability of this ruling in cases where order denying refund has been passed before 8 October 2024, but the appeal is pending before the appellate forums or High Court.  

^{[1] TS-320-HC(UTT)-2025-GST
[2](2000) 2 SCC 536}