Facts of the Case

M/S AMD Apparels Pvt. Ltd. was issued a demand under Section 74 of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017, alleging erroneous refund of IGST of Rs.1,09,00,000/- availed in violation of Rule 96(10) of the CGST Rules, 2017, along with interest under Section 50 CGST Act and an equal penalty under Section 74(9). The demand was raised in Order Sl.No.27/GST/AC/ED6/2025 dated 12.11.2025 (Form GST DRC-07), following a show-cause notice dated 26.06.2025 issued by the Assistant Commissioner of Central Tax, Bengaluru GST East. The petitioner challenged the proceedings before the Karnataka High Court at Bengaluru, which, per Justice S.R. Krishna Kumar, disposed of the writ petition on 18 December 2025, applying its own recent ruling in M/s Hikal Limited v. Union of India (W.P.No.15251/2020, decided 09.12.2025).

Issues Involved

  1. Whether a demand for erroneous IGST refund raised under Rule 96(10) of the CGST Rules, 2017 survives after that Rule's omission by Notification dated 08.10.2024 and its striking down by various High Courts.
  2. Whether such omission/striking down applies to pending demand proceedings initiated under the now-omitted Rule.
  3. Whether the petitioner is entitled to consequential refund with interest.

Petitioner's Arguments

  • Relied squarely on the Karnataka High Court's own decision in M/s Hikal Limited v. Union of India (WP No.15251/2020, decided 09.12.2025), where an identical Rule 96(10) demand was quashed.
  • Rule 96(10) of the CGST Rules, 2017 had itself been omitted by the respondents by Notification dated 08.10.2024, and had also been struck down/read down by the Kerala High Court and other High Courts, including the Bombay High Court, on facts materially identical to the present case.
  • Given this, the show-cause notice and the consequential order raising the demand of Rs.1,09,00,000/- with interest and penalty could not survive and deserved to be quashed, with consequential refund directed.

Respondent's Arguments

  • Learned counsel for the respondents submitted that there was no merit in the petition and that it was liable to be dismissed, without pointing to any material distinguishing the case from Hikal Limited.

Court Order / Findings

  • The Court found the case directly and squarely covered by its own decision in M/s Hikal Limited v. Union of India, where, in view of the striking down of Rule 96(10) of the CGST Rules by the Kerala and Bombay High Courts and the respondents' own omission of the Rule by Notification dated 08.10.2024, the show-cause notice and all further proceedings were quashed.
  • Once Rule 96(10) of the CGST Rules, 2017 — the sole basis for treating an IGST refund as erroneous — stands omitted and has been struck down by competent High Courts, a demand raised solely under that Rule cannot survive and must be quashed along with all consequential proceedings.
  • The petition was allowed and disposed of in terms of Hikal Limited; the show-cause notice dated 26.06.2025 and all further proceedings pursuant to it were quashed.
  • The respondent authorities were directed to refund the amount, if any, payable to the petitioner along with applicable interest, within three months of receipt of a copy of the order.

Important Clarification

  • Rule 96(10) of the CGST Rules, 2017 — restricting the IGST refund route for exporters availing certain import benefits — stands omitted with effect from Notification dated 08.10.2024 and has independently been struck down/read down by the Kerala and Bombay High Courts, among others.
  • Demands for 'erroneous' IGST refund raised solely by invoking Rule 96(10) — whether pending or freshly issued — are liable to be quashed on this basis alone, with consequential refund of the recovered/withheld amount along with interest.

Sections Involved

  • Section 74, CGST Act, 2017 — determination of tax/refund wrongly availed by reason of fraud, wilful misstatement or suppression, invoked to recover the alleged erroneous refund.
  • Rule 96(10), CGST Rules, 2017 — restriction on IGST refund route for certain importers/exporters, since omitted and judicially struck down.
  • Section 20, IGST Act, 2017 and Section 50, CGST Act, 2017 — application of CGST provisions to IGST refunds and levy of interest.

Decision – In Favour of

Assessee (petitioner) — show-cause notice and consequent demand quashed; refund with interest directed.

Case Details

Court: High Court of Karnataka at Bengaluru. Case No.: WP No. 35946 of 2025 (T-RES). Coram: Hon'ble Mr. Justice S.R. Krishna Kumar. Date of Order: 18 December 2025.

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