Omission Of CGST Rules 89(4B) & 96(10) Lapses All Pending Proceedings Not Past & Closed: Bombay High Court - 2025-09-20

Omission of GST Rules Lapses All Pending Proceedings, Bombay High Court Delivers Landmark Verdict

Mumbai: In a significant ruling providing major relief to numerous exporters and importers, the Bombay High Court has declared that all pending proceedings, including show cause notices and non-final orders, initiated under the now-omitted Rules 89(4B) and 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017, have lapsed.

The division bench of Justice M.S. Sonak and Justice Jitendra Jain , while disposing of a large batch of writ petitions led by Hikal Limited vs. Union of India , held that the omission of these rules by the government was not supported by any savings clause, thereby obliterating the provisions as if they never existed, except for "transactions past and closed."

Case Background

The petitioners, a group of companies including Hikal Limited, Yasho Industries, and Alkem Laboratories, had challenged show cause notices and adjudication orders issued by GST authorities. These proceedings were initiated based on the alleged violation of Rules 89(4B) and 96(10) of the CGST Rules, which placed restrictions on claiming GST refunds on exports if certain duty exemptions on imports (like Advance Authorisation) were availed.

During the pendency of these petitions, the Central Government, via Notification No. 20/2024 dated October 8, 2024, omitted the contentious rules. This development became the central issue before the High Court.

Arguments Presented

Petitioners' Contentions:

- Senior Advocate V. Sridharan, leading the arguments for the petitioners, contended that the omission of the rules without an express savings clause meant that all ongoing actions under these rules must be terminated.

- They relied on the common law principle that a repealed statute is wiped off the statute book, rendering pending proceedings invalid unless they have achieved finality.

- The petitioners also argued that Section 6 of the General Clauses Act, 1897, which typically saves pending proceedings upon the repeal of a "Central Act," does not apply to the repeal or omission of a "Rule" by another "Rule."

- It was further highlighted that the Kerala High Court had already declared Rule 96(10) unconstitutional, and this ruling should have persuasive, if not binding, effect across India.

Respondents' (Revenue) Contentions:

- The counsel for the Union of India and GST authorities argued that the pending proceedings were saved.

- They contended that Section 6 of the General Clauses Act should apply, or at least its principles should be invoked.

- It was argued that provisions within the CGST Act, such as Section 166 (laying of rules before Parliament) and Section 174(3), served as implicit savings clauses.

- The government also maintained that the notification omitting the rules was intended to be prospective, which, in their view, protected ongoing actions.

Court's Analysis and Key Precedents

The High Court meticulously analyzed the legal effect of repealing a statutory provision without a savings clause. The bench chose not to delve into the constitutional validity of the rules, as the petitions could be decided on the issue of their omission.

The court heavily relied on the Constitution Bench judgments of the Supreme Court in Rayala Corporation (P) Ltd. vs. Director of Enforcement and Kolhapur Cane Sugar Works Ltd. vs. Union of India . These landmark cases established that Section 6 of the General Clauses Act is not applicable when a subordinate legislation (like a Rule) is repealed or omitted by another subordinate legislation.

"In the present case... Section 6 of the General Clauses Act has no application. There is no saving provision in favour of pending proceedings... The consequential position that follows is that the proceedings lapsed... and any order passed in the proceedings thereafter is to be treated as non est," the court noted, citing the Kolhapur Cane Sugar Works judgment.

The bench systematically dismantled the respondents' arguments:

- It held that Section 174(3) of the CGST Act only pertains to the enactments repealed during the GST transition and cannot be a general savings clause for subsequent rule amendments.

- The argument based on Section 166 was rejected, with the court clarifying that the savings clause therein only applies if Parliament modifies or annuls a rule after it is laid, which was not the case here.

- The court interpreted the "prospective" nature of the notification not as a tool to save pending proceedings, but to protect "transactions past and closed" from being reopened.

Final Verdict and Implications

The High Court concluded that the omission of Rules 89(4B) and 96(10) was absolute and not protected by any statutory savings mechanism. Consequently, all proceedings that had not attained finality before October 8, 2024, were rendered invalid.

The Court ordered:

1. The quashing of all impugned show cause notices and orders in original.

2. The restoration of refund applications that were rejected based on these rules.

3. A directive to the authorities to reconsider and dispose of such refund applications within four months, without referring to the now-omitted rules.

Rejecting the government's plea for a stay, the court stated, "Now that we have declared the impugned show cause notices and orders as lapsed, there is no question of granting any stay which would have the effect of reviving those orders."

This judgment provides a clear legal position on the effect of repealing subordinate legislation and is expected to bring finality to a large volume of litigation, offering significant relief to the trade and industry involved in export and import.