Rule 96(10) of CGST Rules Omission Operates Prospectively But Applies to Pending Proceedings: Gujarat HC [Read Order]

The assessee/petitioner, Addwrap Packaging Pvt. Ltd., has been manufacturing, supplying, and exporting conductors and optical fiber ground wires (OPGW) for a number of years. It exports a sizable amount of its completed goods to clients all over the world.

Before the Central Goods and Services Tax Act, 2017 went into effect on July 1, 2017, the assessee's capital goods and inputs were subject to central excise duty under the Central Excise Act of 1944, and her input services were subject to service tax under the Finance Act of 1994.

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According to the Cenvat Credit Rules of 2004, the assessee was qualified to get a credit for the taxes they paid on capital goods, inputs, and input services. The assessee's Cenvat Credit was then used to pay the excise tax on the items that were cleared in the domestic market and to pay the duties that were due when the goods were exported.

No Cenvat credit of any customs duty in the form of CVD, Education, and other Cesses, Special Additional Duty (SAD), was obtained by the assessee because, according to the terms of the Advance Authorization Scheme, the assessee was not required to pay any customs duty on imported raw materials when using such licenses. The assessees have submitted claims for rebates or refunds of IGST paid on goods and services that were exported outside India.

The assessee's right to a refund of IGST paid on all goods exported by the assessee was restricted due to the substitution of Sub-rule(10) of Rule 96 of the CGST Rules if the supplier of any inputs to the assessee claiming a refund had taken advantage of the IGST exemption under Notification No.78/2017-Customs dated 13.10.2017 (EOU Scheme), Notification No.79/2017-Customs dated 13.10.2017 (Advance Authorization and EPCG scheme), and Notification No. 48/2017-Central Tax dated 18.10.2017 for claiming the benefit of deemed export or merchant export. Central Tax (Rate) Notification No. 40/2017 and Integrated Tax (Rate) Notification No. 41/2017, both dated October 23, 2017.

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The assessee argued that because Rule 96(10) was not included in the aforementioned Notification, things that are still pending before the Court would be governed by it as of the Notification's issuance date, which is October 8, 2024, or the notification would apply retroactively.

The Division Bench of Justices Bhargav D. Karia and D.N. Ray viewed that the 2024 Rules have been issued by Notification No.20/2024, and Rule 10 of those Rules has eliminated Rule 96(10) of the CGST Rules with immediate effect. This would lead to three scenarios: first, whether it would apply retroactively; second, whether it would apply prospectively; or third, whether it would apply prospectively but also to "pending proceedings." Additionally, Rule 10 of the Rules, 2024, applies to ongoing cases as well as prospectively.

While allowing the appeal, the bench held that “Notification No.20/2024 dated 8th October, 2024 would be applicable to all the pending proceedings/cases meaning thereby that Rule 96(10) would stand omitted prospectively but applicable to pending proceedings/cases where final adjudication has not taken place.”

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