Order Passed u/r 96 (10) of CGST Rules, 2017 after same was Omitted without any Saving Clause is Invalid: Uttarakhand HC [Read Order]

In a recent case, the Uttarakhand High Court held that no proceedings can be invoked under the provisions of rule 96(10) of CGST Rule, 2017, after the same was omitted on 8th October, 2024 without a saving clause in favour of the pending proceeding.

Sri Sai Vishwas Polymers, the petitioner, who is the partnership firm, has filed the present writ petition for declaring Rule 96 (10) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) as ultra vires to Section 16 of the IGST Act, 2017 read with Section 54 of the CGST Act, 2017 as well as for setting aside the impugned order dated 03.02.2025 issued by respondent no.2.

Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here

The petitioner is engaged in the manufacture of Gold Bar & Jewellery etc., falling under Chapter 71 of the Central Excise Tariff Act, 1985; that, accordingly, the petitioner is registered with the GST Department; that, the petitioner is discharging tax liability under CGST Act, 2017, and UKGST Act, 2017 & IGST Act, 2017, as applicable.

The petitioner is also availing the facility of ITC on inward supplies of goods and supplies being used for providing outward supplies; that, the officers of the State Goods and Service Tax Department conducted audit of the petitioner, wherein it appears that petitioner has claimed refund amounting to Rs.1,05,25,755/- under the head of IGST.

Know Practical Aspects of Tax Planning, Click Here

A show-cause notice was issued by the respondent no.2 to the petitioner requiring him to show cause as to why alleged inadmissible/erroneous refund amounting to Rs.1,05,25,755/- should not be demanded and recovered from him under Section 74 (1) of the CGST Act, 2017 read with Section 20 of the IGST Rules, 2017 along with Section 50 and penalty under Section 74(1) of the CGST Act, 2017 read with Section of the IGST Act, 2017.

The personal hearing in respect of the show-cause notice, was granted to the petitioner, thereafter, he also filed written submission vide letter dated 16.01.2025. However, respondent no.2 without considering the submissions made by the petitioner, confirmed demand of alleged inadmissible/erroneous refund amounting to Rs.1,05,25,755/- vide order dated 03.02.2025.

The petitioner appearing in support of the petition have drawn the attention of the Court to the provisions of rule 96(10) of the CGST Rules, 2017 would submitted that the said rule, inter alia, provides that the persons claiming refund of integrated tax paid on export of goods or services would be required to ensure compliance of certain provisions morefully, enumerated in the said rules.

How to Audit Public Charitable Trusts under the Income Tax Act Click Here

Further argued that although, a proceeding was initiated by the respondents within the validity of the said rules and show-cause notice in that regard was issued and served on the petitioner, however, before the final order came into existence, rule 96(10) of the said rules stood omitted from the statute book.

It was argued that the initiation of proceeding by the respondents is based on the alleged contravention of conditions set forth in rule 96(10) of the CGST Rules, 2017. Having regard thereto, once, the said rule was omitted from the statute book on 8th October, 2024, the proceeding initiated by the respondents by way of show- cause notice could not have been continued further.

Counsel for the respondent submitted  that, at the time, when the show-cause notice was issued, Rule 96 (10) of the CGST Rule, 2017 was in existence, therefore, respondent no.2 have rightly held that the deletion of Rule 96 (10) w.e.f. 08.10.2024 would operate prospectively where proceedings are initiated during the subsistence of the rule would continue to be governed by the said rules.

Since Rule 96 (10) of CGST Rule, 2017 have been declared ultra vires by the High Court of Kerala in Sance Laboratories Pvt. Ltd. Vs. Union of India, reported in 2024 and have subsequently been deleted vide Notification No.20/2024- Central Tax, dated 08.10.2024, therefore, it would be fruitless to again declare Rule 96 (10) of CGST Rule, 2017 as ultra vires the provisions of Section 16 of the IGST Act, therefore, the prayer no.1 does not service any more.

It was viewed that Rule 96 (10) of CGST Rule, 2017 was omitted from the statute book on 8th October, 2024 and the order impugned was passed on 30th January, 2025. The court observed that rule 96(10) of CGST Rule, 2017 has itself been omitted from the statute book without any saving clause, at least the parties at this stage have not been able to show anything to the contrary.

The Chief Justice G. Narendar and Justice  Alok Mahra viewed that the said provision of rule 96(10) of CGST Rule, 2017 being omitted unconditionally, without a saving clause in favour of the pending proceedings, all actions from the date of such omission of the rule must stop.  The court found that there was no scope for the respondent no. 2 to pass any order by invoking the provisions of rule 96(10) of CGST Rule, 2017 after the same was omitted on 8th October, 2024 without a saving clause in favour of the pending proceeding.

The court allowed the petition and set aside the impugned order dated 03.02.2025 passed by respondent no.2.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates