IGST Refund Proceedings Quashed as Rule 96(10) Omission Ends Pending Adjudication: Calcutta HC [Read Order]

In a recent ruling, the Calcutta High Court held that adjudication proceedings initiated for alleged contravention of Rule 96(10) of the CGST Rules cannot continue once the said Rule has been omitted from the statute, as the legal foundation for the demand ceases to exist.

The case involved Techno Waxchem Private Limited, a manufacturer and exporter of chemical products, which had availed an IGST refund amounting to Rs. 6,28,27,407/- between October 2017 and March 2022. The department alleged that the petitioner had contravened the provisions of Rule 96(10) by availing IGST refunds on exports while simultaneously utilizing the Advance Authorisation Scheme to import inputs duty-free.

A show-cause notice was issued on 27th September 2023 under Section 74 of the CGST Act, 2017. The Adjudicating Authority subsequently passed an order-in-original on 4th February 2025, confirming the demand. The petitioner challenged this order before the High Court.

The petitioner’s counsel argued that during the pendency of the adjudication, the Government issued Notification No. 20/2024-Central Tax dated 8th October 2024, omitting Rule 96(10) of the CGST Rules with effect from that date. It was submitted that since the show-cause notice was based solely on the violation of Rule 96(10), and the rule had been deleted without any saving clause, the proceedings could not survive.

The petitioner placed reliance on the Supreme Court judgments in Rayala Corporation (P) Ltd. v. Director of Enforcement and Kolhapur Canesugar Works Ltd. v. Union of India. These judgments established that Section 6 of the General Clauses Act, 1897, which protects pending proceedings, applies only to the repeal of a Central Act or Regulation and not to the omission of a Rule.

The respondent’s counsel contended that the refund was availed during the subsistence of the Rule and the show-cause notice was also issued while the Rule was in force. It was argued that the omission of the Rule was not retrospective and, therefore, did not invalidate the proceedings for past actions.

Justice Raja Basu Chowdhury observed that the entire adjudication proceeding was premised on the contravention of Rule 96(10). The Court noted that the GST Council, in its 54th meeting, had recommended the omission of the Rule, which was subsequently deleted via notification on 8th October 2024.

Relying on the jurisprudence laid down by the Supreme Court and concurrent views taken by the Bombay, Gujarat, and Delhi High Courts, the Court held that upon the omission of a Rule, it is obliterated from the statute book. In the absence of a specific saving clause, all pending proceedings based on the violation of that Rule must come to an end.

The Court ruled that the omission of Rule 96(10) rendered the foundation of the show-cause notice non-existent. Consequently, the order dated 4th February 2025 was quashed and set aside. The Court directed that all consequences follow, effectively closing the proceedings against the exporter.

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