Omission of Rule 96(10) CGST Applies to All Pending Orders and Appeals: Delhi HC Quashes Exporters’ IGST Refund Restrictions [Read Order]
Aligning with precedents from Kerala, Calcutta, Uttarakhand, and Gujarat High Courts, the Bench quashed exporters’ refund restrictions, declaring that the rule was ultra vires Section 16 of the IGST Act.
The Delhi High Court in a recent case has held that the omission of Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017 applies to all pending proceedings, including show cause notices, orders, and appeals, and therefore such proceedings cannot continue under the deleted provision and quashed the exporters' refund restriction under the rule.
The petitions before the Delhi High Court were filed by exporters, including Vinayak International Housewares Pvt. Ltd., Ashish Foils Pvt. Ltd., and Mayedass International, challenging the vires of Rule 96(10) of the CGST Rules, 2017.
Rule 96(10) restricted exporters from claiming refunds of Integrated Goods and Services Tax (IGST) paid on exports if they had availed certain exemptions or concessional notifications on inputs. The petitioners argued that such restrictions were not contemplated under Section 16 of the IGST Act, which grants a statutory right to a refund of IGST paid on exports.
The petitioners also challenged summons and show cause notices issued under Rule 96(10), contending that the provision was unconstitutional, arbitrary, and unenforceable.
During the pendency of these petitions, the GST Council in its 54th meeting recommended the deletion of Rule 96(10), noting that the provision created unnecessary complications without serving any intended benefit. Pursuant to this recommendation, Notification No. 20/2024 dated 8 October 2024 formally omitted Rule 96(10) from the CGST Rules.
The central questions before the Court were whether Rule 96(10) was ultra vires Section 16 of the IGST Act, whether omission of Rule 96(10) applied prospectively only, or also to pending proceedings, including SCNs, orders, and appeals and whether proceedings initiated under Rule 96(10) before its omission could survive in law.
The Bench of Justice Prathiba M. Singh and Justice Saurabh Banerjee examined the statutory framework and precedents from other High Courts. The Kerala High Court had already declared Rule 96(10) unconstitutional, holding that it imposed restrictions not envisaged under Section 16 of the IGST Act.
The Calcutta and Uttarakhand High Courts had further clarified that omission of a rule without a saving clause obliterates it from the statute book, meaning pending proceedings cannot continue under the deleted provision. The Gujarat High Court similarly held that omission of Rule 96(10) applies to all pending proceedings, thereby quashing SCNs and orders issued under it.
The Delhi High Court agreed with these views, noting that omission of Rule 96(10) was unconditional and without a saving clause. Therefore, all pending SCNs, orders, and appeals cannot be treated as closed transactions and must be covered by the benefit of omission.
The Court reiterated the principle laid down in Kolhapur Canesugar Works Ltd. v. Union of India (2000) by the Supreme Court that omission of a rule without a saving clause halts all actions under it, both prospective and pending.
Applying this reasoning, the Court held that Rule 96(10) was ultra vires Section 16 of the IGST Act and unenforceable. Consequently, all SCNs, orders, and appeals emanating from Rule 96(10) stood quashed. The Court clarified that exporters are entitled to pursue IGST refunds without being barred by the deleted provision.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
