The Calcutta High Court has quashed a GST show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017, along with the consequential orders, after finding that the entire proceedings were founded solely on Rule 96(10) of the CGST Rules, which was omitted without a saving clause.
The bench of Justice Smita Das De observed that the controversy stood concluded by the Supreme Court’s judgment holding that proceedings based on the omitted Rule 96(10) could neither be initiated nor continued in the absence of a saving provision.
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The dispute arose from a show cause notice dated January 9, 2024, issued under Section 74 of the CGST Act for the period between July 2017 and March 2021.
The proceedings were based on the allegation that the petitioners had contravened Rule 96(10) of the CGST and West Bengal GST Rules, 2017. Consequential orders were subsequently passed on January 30, 2025.
Rule 96(10), which imposed restrictions on exporters claiming refunds of integrated tax paid on exports in certain situations, was omitted with effect from October 8, 2024, through Notification No. 20/2024-Central Tax.
The petitioners contended that the rule was omitted unconditionally and that the notification did not contain any saving clause preserving pending proceedings or liabilities arising under the omitted provision.
The petitioners submitted that the issue was no longer res integra in view of the Supreme Court’s ruling in M/s Goodluck India Limited and Another v. Union of India and Others.
The petitioners argued that the Supreme Court, relying on the Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India, had categorically held that when a provision is omitted without a saving clause, it ceases to exist in the eyes of law.
According to the principle reiterated by the Supreme Court, proceedings initiated under an omitted rule can continue only where the omission is accompanied by an express provision preserving existing proceedings or where the governing statute creates a legal fiction permitting their continuation.
The Supreme Court had noted that Rule 96(10) was omitted because it was causing unnecessary complications without serving its intended purpose. It further recorded that the legislature had not introduced any saving or sunset clause when omitting the provision.
The recommendation that the omission should operate prospectively was merely advisory and did not bind the rule-making authority, the Supreme Court had held.
The Apex Court concluded that the intention behind omitting the rule without a saving clause was to end the complications once and for all, rather than keep them alive in pending proceedings.
The petitioners also brought to the High Court’s attention an Office Memorandum dated August 24, 2026, issued by the Central Board of Indirect Taxes and Customs.
Through the memorandum, the CBIC accepted the legal position declared by the Supreme Court and instructed field formations not to initiate or pursue proceedings based on the omitted Rule 96(10).
A copy of the Office Memorandum was placed on the record before the High Court.
The GST authorities filed an affidavit opposing the writ petition and submitted that they had acted in accordance with the law prevailing at the relevant time.
After hearing the parties and examining the material on record, the High Court took judicial notice of the Supreme Court’s ruling in Goodluck India and the CBIC Office Memorandum dated August 24, 2026.
The Court found that the show cause notice issued to Glen Industries and the consequential orders were based solely on the alleged violation of Rule 96(10).
“In the light of the judgment dated 6th August, 2026 passed in the case of M/s Goodluck India Limited & Anr., the show cause notice dated 09.01.2024 issued under Section 74 of the CGST Act, 2017 for the period from July 2017 to March 2021, along with the consequential orders dated 30.01.2025 passed in pursuance thereof, which are founded solely upon the omitted Rule 96(10), are hereby quashed and set aside,” the Court ordered.
The High Court disposed of the writ petition by setting aside both the show cause notice and the consequential adjudication orders.
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