A Landmark IGST Refund Ruling by Gujarat High Court: Relief for Exporters, Clarity for the System

The article ‘A Landmark IGST Refund Ruling by Gujarat High Court: Relief for Exporters, Clarity for the System’ is authored by Abhishek A Rastogi Tax and Constitutional Expert and Founder, Rastogi Chambers.

The Indian tax landscape, particularly for exporters, has witnessed a significant judicial intervention with the Gujarat High Court’s decision in Cosmo Films Limited vs. Union of India. As counsel leading the arguments in this matter, I believe this ruling marks a watershed moment in the ongoing debate over the legitimacy and applicability of Rule 96(10) under the CGST Rules.

Background and Legal Question

For years, exporters have grappled with Rule 96(10), which restricted the ability of certain exporters to claim IGST refunds if they availed of benefits such as Advance Authorization or other exemptions. While the intent of the rule may have been to prevent double benefits, its implementation caused unnecessary hardship for genuine exporters, leading to the denial of substantial refund claims and prolonged litigation.

The Gujarat High Court had earlier granted interim relief in the Cosmo Films matter, and in this final round, the issue before the Court extended to the validity of the pending adjudications and show cause notices based on a rule that stood deleted.

The Court’s Reasoning

The High Court refrained from pronouncing on the constitutional validity of Rule 96(10) itself. However, what makes this ruling particularly impactful is its pragmatic approach toward the legal effect of Notification No. 20/2024-Central Tax, which deleted Rule 96(10) effective 8th October 2024.

While the deletion was prospective on paper, the Court held that it would apply to all pending proceedings — including show cause notices and original adjudication orders. In doing so, the Court carved out a clear and equitable interpretation: that any proceeding relying solely on Rule 96(10), now omitted, cannot sustain.

Practical Impact of the Ruling

1. All Show Cause Notices and Adjudication Orders Quashed: The judgment has the direct effect of nullifying all pending actions based on Rule 96(10). This includes proceedings at the adjudication, appeal, and show cause stage.

2. Exporters Entitled to IGST Refunds: The exporters who were previously denied IGST refunds are now eligible to receive them, along with any pre-deposits made during appellate proceedings.

3. Legal Precedent Beyond Gujarat: While this judgment comes from the Gujarat High Court, its reasoning and clarity provide persuasive value to courts and adjudicating authorities across the country. Exporters facing similar proceedings outside Gujarat can invoke this decision to seek relief.

4. Clarity on Retrospective vs Prospective Omission: The Court dealt with three possible interpretations—retrospective effect, purely prospective effect, and a prospective effect that applies to pending matters. It rightly chose the third path, balancing legality with fairness.

Broader Constitutional Implications

Even though the Court did not rule on the constitutional validity of the rule, its refusal to entertain adjudications based on an omitted provision reflects a constitutional principle — that the law must not operate unfairly or oppressively when the basis of such law no longer exists.

This ruling echoes the settled legal position that an omission or deletion of a rule, when notified by the Government, has a substantive effect that must reflect in ongoing litigation. Continuing with adjudication based on a non-existent rule would have violated the principles of natural justice and legislative intent.

Guidance for Taxpayers and Professionals

Exporters and legal professionals should immediately evaluate pending cases to identify whether they fall within the scope of this ruling. Those in appeal stages with pre-deposits should initiate refund claims. Adjudicating authorities must take judicial notice of this decision and act accordingly to avoid infructuous litigation.

Even outside Gujarat, writ courts and authorities may be urged to adopt the same line of reasoning to ensure uniformity, fairness, and administrative efficiency.

Conclusion

This decision in Cosmo Films is not just about one rule or one refund. It reaffirms the rule of law and provides long-awaited relief to an industry critical to India’s economic growth. It is a reminder that tax administration must always align with constitutional values of fairness and certainty.

The judgment will serve as an important precedent and should inspire further reforms aimed at minimizing litigation and ensuring timely refunds to exporters — the real backbone of our foreign trade framework.

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