Facts of the Case:
In this case, the petitioner were manufacturers–exporters engaged in export of goods under the IGST-paid route and were regularly claiming refunds of IGST paid on export of goods. After GST came into force, Notification No. 79/2017-Customs exempted IGST on imports made under Advance Authorisation. Subsequently, Rule 96(10) was inserted through Notification No. 3/2018, which restricted IGST refunds on exports if the exporter had availed certain customs or GST exemption notifications. Invoking Rule 96(10), the Department issued summons and show cause notices to the petitioners, questioning the refunds already granted and proposing recovery.
While these proceedings were pending, the GST Council in its 54th meeting recommended omission of Rule 96(10) due to operational difficulties, and the Central Government vide Notification No. 20/2024 dated 8 October 2024 formally omitted the rule.
The petitioners challenged (i) the constitutional validity of Rule 96(10), and (ii) the summons/SCNs issued under the said rule, arguing that the omission and judicial precedents rendered it unenforceable. The Department argued that the omission was prospective, and earlier actions were saved by implication.
Issue:
Whether Rule 96(10) of the CGST Rules now omitted could still be invoked for past periods, and whether proceedings initiated under the said rule before 8 October 2024 survive post omission, particularly in light of multiple High Court judgments declaring the rule unconstitutional or unenforceable for being contrary to Section 16 of the IGST Act.
Held that:
The Court noted that Rule 96(10) had been omitted without any saving clause, and the GST Council itself acknowledged that the rule had created unintended complications. Reliance placed on precedents, including the Kerala High Court’s judgment in Sance Laboratories Pvt. Ltd., wherein it was held that Rule 96(10) unconstitutional for restricting refunds beyond the scope of Section 16 of the IGST Act and other High Court rulings in Glen Industries (Calcutta HC) and Sri Sai Vishwas Polymers (Uttarakhand HC), the Court held that once a rule is omitted without any express saving, all pending and future proceedings under the said rule must cease.
The Court observed that the Department’s contention of prospective application could not be accepted, as no language in Notification No. 20/2024 preserved past actions. Consequently, proceedings i.e. summons, show cause notices, and adjudication initiated solely under Rule 96(10) cannot survive after 8 October 2024. Following the consistent judicial trend, the Court concluded that actions taken under Rule 96(10) for the period prior to its omission were unsustainable, and the rule cannot be enforced against exporters for any period once it stands deleted from the statute book.
Case Name: Vinayak International Housewares, M/s. Ashish Foils Pvt Ltd., M/s. Mayedass International Versus Union of India & Ors. dated 20.11.2025
To read the complete judgement 2025 Taxo.online 3088
