Facts of the Case

Kelvion India Pvt. Ltd., engaged in manufacturing and exporting heat exchangers, had imported raw materials under advance authorisation claiming exemption from basic customs duty and IGST, and separately claimed IGST refunds on exports made on payment of IGST between June 2019 and December 2019. The Directorate of Revenue Intelligence alleged that this combination breached Rule 96(10) of the CGST Rules, 2017, leading the petitioner to voluntarily repay refunds of Rs.2,82,39,137/- with interest of Rs.38,19,915/-. The petitioner then sought a refund of the excess amount repaid — said to be about four times what would have been due even if Rule 96(10) applied — as 'excess payment of tax', which was rejected across seven connected writ petitions by orders dated 10 January 2022 and 27 March 2023. The Bombay High Court, per Justices M.S. Sonak and Advait M. Sethna, heard the matter on 9 December 2025.

Issues Involved

  1. Whether the omission of Rule 96(10) of the CGST Rules, 2017 — held in Hikal Ltd. v. Union of India to be without a saving clause for pending proceedings — affects the petitioner's refund-rejection orders founded on that Rule.
  2. Whether Rule 86(4B) of the CGST Rules can be applied retrospectively to deny the refund of the excess amount repaid.
  3. Whether the petitioner should be relegated to the GST Appellate Tribunal, which remains non-operational.

Petitioner's Arguments

  • Having voluntarily repaid IGST refunds of Rs.2,82,39,137/- with interest under alleged breach of Rule 96(10), the petitioner discovered the repayment exceeded — by roughly four times — what would have been payable even if Rule 96(10) were held applicable, and sought refund of the excess as 'excess payment of tax'.
  • Relying on the Bombay High Court's decision in Hikal Ltd. v. Union of India (Writ Petition No.78 of 2025, decided 11.09.2025), which held that Rule 96(10) was omitted without any saving provision for pending proceedings, the petitioner submitted that the very basis of the alleged breach — and the associated invocation of Rule 86(4B) — no longer survives.
  • Proposed that the impugned orders of the adjudicating and appellate authorities be set aside and the refund application, along with the show-cause notice dated 1 December 2021, be remanded for a fresh decision in light of Hikal Ltd.

Respondent's Arguments

  • Learned counsel for the respondents did not agree with the petitioner's contentions, submitting that Rule 86(4B) of the CGST Rules cannot be interpreted to have retrospective effect, and that there were no errors in the impugned orders.
  • Submitted that the petitioner had an alternate remedy before the GST Appellate Tribunal instead of invoking writ jurisdiction.

Court Order / Findings

  • The Court noted that the GST Appellate Tribunal is not yet operational, so relegating the petitioner to that alternate remedy would serve no useful purpose in the peculiar facts of this case.
  • Since the adjudicating and appellate authorities did not have the benefit of the ruling in Hikal Ltd. v. Union of India — that Rule 96(10) of the CGST Rules, 2017 was omitted without a saving clause for pending proceedings — orders founded on an alleged breach of that Rule, and the connected invocation of Rule 86(4B), must be reconsidered in light of that decision.
  • Without expressing any opinion on the effect of Hikal Ltd. or the merits of the retrospectivity argument, the Court quashed the impugned orders dated 10 January 2022 and 27 March 2023 and remanded the matter for fresh decision on the refund application and the show-cause notice, considering Hikal Ltd. and all other contentions, within six months.
  • The order was made applicable to all seven connected writ petitions with materially identical facts, with leave granted for written submissions in addition to personal hearing.

Important Clarification

  • Where a demand or refund-rejection order rests on an alleged breach of Rule 96(10) of the CGST Rules, 2017, and Rule 96(10) has since been omitted without a saving clause for pending proceedings, the adjudicating authority must re-examine the matter in light of that omission even in refund disputes, not only in fresh demand notices.
  • Non-operation of the GST Appellate Tribunal is itself a ground for a High Court to entertain a writ petition instead of insisting on the alternate statutory remedy, particularly where a subsequent binding precedent needs to be applied afresh.

Sections Involved

  • Rule 96(10), CGST Rules, 2017 — restriction on the IGST refund route for exporters availing certain import benefits, since omitted.
  • Rule 86(4B), CGST Rules, 2017 — restriction on re-credit/refund of amounts voluntarily repaid, whose retrospective application was disputed.
  • Section 54, CGST Act, 2017 — refund provisions under which the 'excess payment of tax' claim was made.

Decision – In Favour of

Disposed of with directions; in favour of the assessee to the extent of quashing the impugned orders and securing fresh adjudication in light of Hikal Ltd., without a final ruling on entitlement to refund.

Case Details

Court: High Court of Judicature at Bombay. Case No.: Writ Petition No. 14854 of 2023 (with connected Writ Petition Nos. 14862, 14860, 14858, 14857, 14855 and 14852 of 2023). Coram: Hon'ble M.S. Sonak and Hon'ble Advait M. Sethna, JJ. Date of Order: 9 December 2025.

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.