The Calcutta High Court has quashed a GST show cause notice and the consequential orders issued against an exporter for allegedly violating Rule 96(10) of the Central Goods and Services Tax Rules, 2017, observing that proceedings founded solely on the omitted provision cannot survive in the absence of a saving clause.
The bench of Justice Smita Das De relied on the Supreme Court’s August 6, 2026 ruling in M/s Goodluck India Limited & Anr. v. Union of India & Ors., which held that proceedings cannot be initiated or continued under Rule 96(10) after its unconditional omission.
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The High Court was hearing a writ petition filed by M/s KSE Electricals Private Limited and another against the Additional Commissioner, Kolkata South CGST and Central Excise Commissionerate, and other authorities.
The dispute arose from a show cause notice dated July 25, 2024, issued under Section 74 of the CGST Act for the period from July 2017 to March 2022. The notice alleged that the petitioners had acted in contravention of Rule 96(10) of the CGST Rules.
Consequential orders were subsequently passed against the petitioners on February 4, 2025.
Rule 96(10), which placed restrictions on the refund of integrated tax paid on exported goods or services in specified circumstances, was omitted with effect from October 8, 2024, through Notification No. 20/2024-Central Tax.
The petitioners argued that the omission was unconditional and was not accompanied by any saving or sunset clause permitting pending proceedings to continue.
According to them, once the provision was omitted without protecting past or pending proceedings, it ceased to exist in the eyes of law. Therefore, the authorities could neither initiate nor continue proceedings based exclusively on the omitted rule.
Appearing for the petitioners, counsel submitted that the controversy was no longer res integra in view of the Supreme Court’s decision in the Goodluck India case.
The petitioners referred to paragraphs 6 to 9 of the Supreme Court’s order in Goodluck India, in which the apex court relied on the Constitution Bench ruling in Kolhapur Canesugar Works Ltd. v. Union of India, reported in (2000) 2 SCC 536.
The Supreme Court had observed that proceedings initiated under an omitted rule may continue only where the law contains an express provision saving those proceedings or adopts a legal fiction permitting their continuation.
It noted that Rule 96(10) had been omitted because it was leading to unnecessary complications without serving its intended purpose. The rule-making authority had not included any saving or sunset clause while deleting the provision.
The Supreme Court further clarified that a recommendation suggesting prospective omission was merely advisory and did not bind the rule-making authority. It observed that the omission without a saving clause demonstrated an intention to bring the complications associated with Rule 96(10) to an end, including in pending proceedings.
Noting that several cases concerning the omitted rule were pending before different High Courts and that conflicting decisions had been delivered, the Supreme Court directed that its order be circulated to all High Courts to bring finality to the litigation.
The petitioners also placed before the Calcutta High Court an Office Memorandum dated August 24, 2026, issued by the Central Board of Indirect Taxes and Customs.
They submitted that the memorandum showed that the CBIC had accepted the law declared by the Supreme Court and instructed its field formations not to initiate or pursue proceedings based on the omitted Rule 96(10).
A copy of the Office Memorandum was taken on record by the High Court.
The GST authorities filed an affidavit opposing the petition. Their counsel submitted that the department had acted in accordance with the law prevailing at the relevant time.
The High Court took judicial notice of both the Supreme Court’s judgment in Goodluck India and the CBIC Office Memorandum dated August 24, 2026.
The Court held that, in light of the Supreme Court’s ruling, the July 25, 2024 show cause notice issued under Section 74 for the tax period from July 2017 to March 2022 could not be sustained because it was founded solely on the omitted Rule 96(10).
The High Court quashed the show cause notice along with the consequential orders dated February 4, 2025, and disposed of the writ petition.
The operative paragraph of the order contains a reference to “Rule 19(10)”; however, the proceedings and the entire discussion in the judgment concern Rule 96(10) of the CGST Rules.
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