SCNs, Appeals and Non-Finalised Orders under Repealed GST Rules 89(4B) & 96(10) Cannot Survive after its Omission: Bombay HC [Read Order]

The Bombay High Court has ruled that after the omission of the Rules 89(4B) and 96(10) of GST ( Goods and Services tax), the pending proceedings, in the absence of any saving clauses or the benefit of Section 6 of the General Clauses Act, all pending proceedings are not preserved and will stand lapsed.

The bench of Justice Jitendra Jain and M.S. Sonak observed that “following the omission or repeal of the impugned Rules, i.e., Rules 89(4B) and 96(10) of the CGST Rules via Notification dated 08 October 2024, and in the absence of any saving clauses or the benefit of Section 6 of the General Clauses Act, all pending proceedings—such as undisposed show cause notices, orders disposing of show cause notices issued after 08 October 2024, or even orders made before 08 October 2024 but not yet finalised due to appeals before the Appellate Authorities or challenges before this Court, thus not constituting “transactions past and closed”—are not preserved and will stand lapsed.”

The petitioners, including Hikal Limited (lead petition), argued that since the omission was not backed by a savings clause, all pending proceedings based solely on these rules whether show cause notices, recovery actions, or adjudication orders stood lapsed. They pointed out that the only allegations in the SCNs and orders were violations of Rule 89(4B) or 96(10), with no other grounds involved.

In Hikal Limited’s case, the company, engaged in chemicals and pharmaceuticals, was issued a show cause notice in August 2024 demanding over ₹67 crore for alleged breach of Rule 96(10). Despite the rule being omitted in October 2024, the adjudicating authority passed an order in January 2025 confirming demand, interest, and penalty. Hikal argued that the omission without savings rendered the SCN and order without jurisdiction, besides claiming that the rule was unconstitutional and revenue-neutral in its effect.

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The petitioners, led by Senior Advocate Mr. V. Sridharan, argued that Rules 89(4B) and 96(10) of the CGST Rules were ultra vires the parent Act, arbitrary, disproportionate, and violative of Article 14 of the Constitution. They submitted that these rules frustrated rather than advanced legislative policy. Reliance was placed on several Supreme Court rulings, and it was stated that the Kerala High Court in Sance Laboratories Pvt. Ltd. had already declared Rule 96(10) unconstitutional, a decision unchallenged by the Revenue and hence binding nationwide.

Even assuming constitutional validity, the petitioners contended that the omission of the rules via Notification No. 20/2024 dated 08 October 2024 lacked any savings clause, making Section 6 of the General Clauses Act inapplicable.

They pointed out that in many prior notifications omitting rules, express savings were provided, but not here, which was deliberate. Thus, once omitted, the rules stood obliterated from the statute book as if they never existed, except for “transactions past and closed,” i.e., matters concluded with finality.

The counsel followed on judgments like Rayala Corporation, Kolhapur Cane Sugar Works, and Shree Bhagwati Steel Rolling Mills and maintained that pending SCNs, appeals, or even non-finalised adjudication orders based solely on the omitted rules lapsed automatically. They said that High Courts in Gujarat and Uttarakhand had already taken a similar view, holding Section 6 inapplicable to rules.

The petitioners submitted that coercively recovered refunds under the impugned rules must be returned, and pending refund applications be processed without reference to the repealed provisions.

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The Revenue defended the validity of Rules 89(4B) and 96(10), arguing they were fiscal safeguards and not unconstitutional or ultra vires. They maintained that the Kerala High Court’s decision striking down Rule 96(10) did not bind the Bombay High Court, and that greater deference must be shown to rule-making in fiscal matters.

On the effect of omission, the Respondents argued that Section 6 of the General Clauses Act applied because the rules were framed under Section 164 of the CGST Act, treating them as a “Central Act” for this purpose. They relied on judicial precedents and Section 174(3) of the CGST Act to contend that pending proceedings were saved. They further claimed that Rayala Corporation was per incuriam or obiter, and that later rulings and the Law Commission’s report supported saving of proceedings even in delegated legislation.

They also invoked Rule 1(2) of the 2024 Amendment Rules to argue that the omission was prospective, and combined with GST Council recommendations, it functioned as a savings clause. Additionally, reliance was placed on Section 166 of the CGST Act, which they said protected pending proceedings, since SCNs were issued under Section 73 CGST Act read with Section 20 IGST Act, provisions that remained in force.

On these grounds, the Respondents urged dismissal of the petitions, asserting that omission of the rules did not wipe out pending SCNs or orders passed under them.

In rejoinder, Mr. Sridharan clarified that Rule 1(2) of the 2024 Amendment Rules was framed only to prevent reopening of “transactions past and closed” and had no bearing on pending proceedings. He argued that retrospectivity was irrelevant because the omission was effected without a savings clause, thereby invoking the common law principle that such provisions are obliterated as if they never existed.

He dismissed reliance on Section 166 of the CGST Act, noting that it merely deals with the procedural laying of rules before Parliament, which is not mandatory and has no effect of saving pending proceedings. Similarly, Section 174(3) was said to be confined to repeals under sub-sections (1) and (2), and could not extend to omissions in rules framed under delegated legislation.

On the Revenue’s argument that rules framed under Section 164 of the CGST Act should be treated as a “Central Act” for purposes of Section 6 of the General Clauses Act, Mr. Sridharan pointed out that earlier views of the Gujarat and Karnataka High Courts had been expressly overruled by the Constitution Bench in Kolhapur Cane Sugar Works Ltd.

He argued that subsequent cases cited by the Revenue also conflicted with this binding precedent. Thus, reiterating that pending SCNs and orders based solely on the omitted rules could not survive, the Petitioners urged the Court to make the Rule absolute and quash the impugned proceedings.

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The High Court declined to rule on the constitutional validity of Rules 89(4B) and 96(10), holding it unnecessary since the petitions could be decided on the narrower ground of their omission without a savings clause. The Court reaffirmed the principle that once a provision is repealed or omitted without a saving clause, it is treated as if it never existed, except for “transactions past and closed.”

The court, relying on common law, Rayala Corporation, and Kolhapur Cane Sugar Works, clarified that Section 6 of the General Clauses Act applies only to repeals by a Central Act or Regulation, not to rules made under delegated legislation. Thus, Section 6 could not save SCNs or orders issued solely under the omitted rules.

The Court rejected arguments based on Section 166 and 174(3) of the CGST Act, Clause 1(2) of the 2024 Amendment Rules, and GST Council minutes, holding none of these amounted to a savings clause.

The Court also held that pending SCNs, orders passed after 8 October 2024, and even pre-omission orders that were still under appeal or writ challenge could not be treated as “transactions past and closed.” They therefore lapsed automatically. The bench also said that the refund applications rejected solely on the basis of these rules were directed to be restored and reconsidered on merits.

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