The Supreme Court has held that the omission of Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017 applies to proceedings that were pending when the provision was omitted, thereby removing the restriction imposed by the provision on claims for refund of Integrated Goods and Services Tax (IGST) paid on goods and services exported from India.
The Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran dismissed the appeals challenging the High Court judgment on the issue and held that, in the absence of a saving clause, the omission of Rule 96(10) brings the provision to an end even in respect of pending proceedings.
The batch of proceedings arose from challenges concerning the legal effect of the omission of Rule 96(10) of the CGST Rules.
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Rule 96 deals with refund of IGST paid on goods or services exported out of India. Rule 96(10), before its omission, imposed restrictions in cases where exporters had received certain supplies after availing benefits under specified notifications. Consequently, exporters whose refund claims were affected by the provision faced restrictions even though they had otherwise claimed refund of IGST paid on exports.
The controversy before the Supreme Court was whether the deletion of Rule 96(10), with effect from October 8, 2024, would operate only prospectively or would also benefit cases that were already pending on the date of its omission.
The Union of India and the Department challenged the High Court’s conclusion that the omission would apply to pending proceedings. On the other hand, certain assessees, including Goodluck India Limited, had challenged the validity and vires of Rule 96(10) itself.
Rule 96(10) was omitted through Notification No. 20/2024 with effect from October 8, 2024.
The Supreme Court noted that, following the omission, the question was whether pending refund proceedings could continue to be governed by the deleted restriction or whether the exporters would be entitled to have their claims considered without the restriction contained in Rule 96(10).
The Court specifically noted that the omission was made without any saving clause. This became central to the Court’s determination.
The Union Government argued that the GST Council’s recommendation contemplated prospective operation of the omission. During the hearing, the Additional Solicitor General fairly conceded that the recommendation of the GST Council was advisory and was not mandatory for the rule-making authority to accept.
The Court examined the minutes of the 54th meeting of the GST Council held on September 9, 2024, particularly the recommendation concerning Rule 96(10).
The Law Committee had observed that the operation of Rule 96(10) was resulting in unnecessary complications without serving the intended purpose. It therefore recommended omission of Rule 96(10), along with Rules 89(4A) and 89(4B), and consequential amendments to other provisions of the CGST Rules.
The recommendation contemplated omission with prospective effect. However, the Supreme Court emphasised that the recommendation of the GST Council was advisory and did not itself create a binding requirement that the omission must operate prospectively.
A significant aspect of the judgment was the Court’s reliance on the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India.
The Supreme Court examined the legal consequences of omission of a statutory rule and noted the principle that when a provision is repealed or deleted, it is generally treated as having been obliterated from the statute book. The Court observed that if pending proceedings under an omitted rule are intended to continue, there must be a legal mechanism, such as a saving clause, enabling such continuation.
The Constitution Bench had earlier held that Section 6 of the General Clauses Act does not automatically apply to the omission of a rule, as distinguished from the repeal of a Central Act or regulation. Therefore, where the rule-making authority omits a rule, continuation of proceedings initiated under that rule requires an appropriate saving mechanism.
Applying this principle to Rule 96(10), the Supreme Court found that there was no saving clause or sunset clause accompanying its omission.
The Court observed that the rule had been omitted because it was causing “unnecessary complications without any intended benefit being served.” In the absence of a provision preserving the old rule for pending cases, the Court held that there was no justification for keeping the omitted restriction alive merely because proceedings had already commenced.
The Court consequently held that the omission of Rule 96(10) applies squarely to pending proceedings.
This means that refund claims involving pending proceedings cannot continue to be subjected to the restrictions contained in Rule 96(10) after its omission, where the proceedings were pending when the provision ceased to operate.
The Supreme Court found no reason to interfere with the High Court’s judgment.
Importantly, the Court noted that a large number of proceedings concerning the same issue were pending before different High Courts and that conflicting decisions had already emerged. The Supreme Court expressed the hope that its decision would bring the litigation to an end and provide closure to the pending disputes.
The Registry was directed to circulate a copy of the order to all High Courts. The High Court Registries were further directed to ensure that cases involving the omission of Rule 96(10) are placed before the appropriate roster benches and dealt with expeditiously.
The proceedings included challenges by assessees to the very vires and validity of Rule 96(10).
However, since the Court upheld the position that the omitted provision could not continue to govern pending proceedings in the absence of a saving clause, the two SLPs filed by the assessees, including SLP (C) No. 24550 of 2025, were dismissed as infructuous.
The Court thereafter granted leave in the remaining matters and ultimately dismissed the appeals challenging the High Court’s view.
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