Rule 96(10) CGST Rules | Supreme Court Says Deleted Restriction On IGST Refunds Cannot Apply To Claims Pending On Omission

The Supreme Court has ruled in favour of exporters seeking refunds of integrated tax paid on exports, holding that a restriction that had earlier prevented some of them from claiming such refunds cannot be applied to their cases if the refund proceedings were pending when the restriction was removed.

The restriction was contained in Rule 96(10) of the Central Goods and Services Tax Rules, 2017. Before it was omitted on October 8, 2024, the rule restricted refunds of integrated tax paid on exports where the exporter had received supplies after availing benefits under specified government notifications.

A bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran upheld the Gujarat High Court's view that the omission of Rule 96(10) applies to proceedings pending on the date of its omission.

The court applied the principle laid down by the Constitution Bench in Kolhapur Canesugar Works Ltd. v. Union of India that proceedings under an omitted rule can continue only if there is a provision saving those proceedings or a legal fiction allowing them to continue

“The Constitution Bench decision applies squarely in the above case. We may also observe that even going by the recommendations as extracted hereinabove, sub-rule (10) of Rule 96 was omitted because it was 'leading to unnecessary complications without any intended benefit being served' (sic). As fairly submitted by the learned ASG the legislature has not brought in any saving clause or a sunset clause, when sub-rule (10) of Rule 96 was omitted. The recommendation that the omission should be prospective is also advisory in nature and does not bind the rule making authority. The intention to omit the rule without any saving clause was to bring to an end, the unnecessary complications once and for all and the intention cannot be to keep alive the unnecessary complications insofar as the pending proceedings are concerned” the court observed.

The Union of India and the Department had challenged the High Court judgment, which held that the omission of Rule 96(10) would apply to every proceeding pending on the date of its omission. The assessees, on the other hand, contended that once the Rule was omitted without a saving clause, the restriction could no longer be applied to their pending refund proceedings.

The Union of India relied on the minutes of the 54th meeting of the GST Council held on September 9, 2024. The Law Committee had recommended that Rule 96(10), along with Rules 89(4A) and 89(4B), be omitted with prospective effect.

The Law Committee had observed that the operation of Rule 96(10) was “leading to unnecessary complications without any intended benefit being served” and recommended its omission.

Additional Solicitor General S. Dwarakanath, appearing for the Union of India, fairly conceded that the recommendation was advisory and was not mandatory to accept. The recommendation was relied upon to argue that the omission should apply prospectively.

The assessees relied on the Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536.

That case dealt with the effect of omitting a rule while proceedings under it were pending. The Constitution Bench held that proceedings under an omitted rule could continue only where there was a provision providing for their continuance or a legal device creating a fiction that allowed them to continue.

Applying that principle, the Supreme Court noted that no saving clause or sunset clause had been introduced when Rule 96(10) was omitted.

The court also noted that the recommendation for prospective application was advisory and did not bind the rule-making authority.

The court held that the intention behind omitting the rule could not be to end those complications prospectively while allowing them to continue in pending proceedings.

The court found no reason to interfere with the High Court's judgment. It noted that many proceedings concerning the issue were pending before different High Courts and that conflicting decisions had also been passed.

“We hope that such proceedings would get closure with this judgment,” the court observed.

The Registry was directed to send a copy of the order to all high courts.

Their registries were directed to ensure that cases concerning the omission of Rule 96(10) are placed before the courts having the roster, after taking appropriate orders from the respective Chief Justices, expeditiously to bring quietus to the subject litigation.

The appeals challenging the High Court's view were accordingly dismissed.

The two SLPs filed by the assessees challenging the vires and validity of Rule 96(10) were also dismissed as infructuous in view of the nature of the order passed by the Supreme Court.

For Petitioners: Abhishek A. Rastogi, Purnendu Bajpai, Meenal Songire, Shubham Singh, AOR.

For Respondents/Union of India: S. Dwarkanath, ASG, Gurmeet Singh Makker, AOR, Vibhu Shankar Mishra, Anmol Chandan, Bhuvan Kapoor, Raman Yadav, Nikhil Aradhe, S. Vijay Adithya, Mudit Bansal, Rajat Vaishnaw, Prabhakar Yadav and Abhay Kalra.

For tConnected Matters: Yashovardhan Singh, Adithya Nair, V. Lakshmikumaran, Charanya Lakshmikumaran, AOR, L. Badri Narayanan, Jay Savla, Sr. Adv., Prakash Shah, Sr. Adv., Bharat Raichandani and other counsel.