Refund Order Based on Omitted Rule 96(10) of CGST Rules Prima Facie Invalid: Calcutta HC Stays ₹1.96 Cr GST Demand [Read Order]

The Calcutta High Court, in a recent case, has stayed a ₹1.96 crore refund recovery order passed under Rule 96(10) of the CGST Rules, 2017, after noting that the provision was omitted from the statute book before the order was issued. The court held that once a rule is unconditionally omitted without a saving clause, all proceedings under it must cease as if the rule never existed.

The writ petition was filed by a registered taxpayer, Glen Industries Private Limited engaged in the manufacture and trade of plastic containers, seeking to quash two impugned notifications, as ultra vires the CGST and IGST Acts, as well as to challenge an order dated 30 January 2025 passed by the tax authorities confirming recovery of allegedly erroneous refund.

However, during the hearing, counsel for the petitioner informed the court that the challenge to the notifications was not being pressed, and the petition would be confined to the challenge against the refund order alone.

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The petitioner contended that a show cause-cum-demand notice was issued on 9 January 2024, alleging contravention of Rule 96(10) and wrongful availment of the automatic IGST refund amounting to ₹1,95,64,079. The taxpayer duly replied on 7 March 2024, denying the allegations and asserting due compliance.

Subsequently, the proper officer issued an order on 30 January 2025, confirming the demand of ₹1.96 crore along with interest under Section 74 ofthe CGST Act.

Rule 96(10), before its omission, restricted exporters from claiming a refund of IGST paid on exports if they had simultaneously availed benefits under certain exemption notifications. The intent was to prevent double benefits. However, this rule was omitted from the CGST Rules with effect from 8 October 2024.

Arguing before the court, the petitioner submitted that once the rule was omitted without a saving clause, any proceedings or orders based on it would stand invalid. He relied on the Supreme Court’s ruling in Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors. (2000) , which held that omission of a rule removes it entirely from the statute, and pending actions must cease unless a saving provision exists.

The petitioner further relied on the Bombay High Court’s order in Aeroflex Industries Ltd. v. Union of India ( 2024) and the Allahabad High Court’s decision in Saru Silver Alloys Pvt. Ltd. v. Union of India (2025), both of which took a similar view on the effect of omission of Rule 96(10).

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On the other hand, the GST authorities contended that the proceedings were lawfully initiated during the subsistence of Rule 96(10), and both the show cause notice and the petitioner’s reply were within the validity period of the rule.

The Department argued that only the final order was passed subsequently, and such timing does not invalidate the action. The respondent sought time to file an affidavit-in-opposition and opposed any interim relief at this stage.

After considering the submissions, the single bench of Raja Basu Chowdhury examined the legal effect of omission under the General Clauses Act, 1897. Referring to the Supreme Court’s reasoning in Kolhapur Canesugar Works Ltd. & Anr v.UOI & Ors.(2000), the court noted that Section 6 of the General Clauses Act, which protects rights and liabilities accrued under a repealed law, applies to “repeal” of a statute but not to omission of a rule.

Unless a specific saving clause exists, omission has the effect of wiping out the provision entirely, and any pending or future actions based on it must stop.

The court observed that in this case, Rule 96(10) was omitted on 8 October 2024 without a saving clause, and no replacement provision had been introduced. Therefore, the proper officer had no jurisdiction to pass an order on 30 January 2025 invoking the omitted rule. “All actions from the date of such omission must stop,” the judge observed, holding that the petitioner had made out a prima facie case for interim protection.

Accordingly, the single bench of Justice Raja Basu Chowdhary stayed the operation of the impugned refund recovery order until final disposal of the writ petition. The respondents were granted six weeks to file an affidavit-in-opposition, and the petitioner was given four weeks thereafter to file a reply. The matter will be listed for further hearing after the exchange of affidavits.

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