Facts of the Case

Hikal Limited, a pharmaceutical exporter, along with roughly thirty connected petitioners across the pharmaceutical and chemical manufacturing sector, challenged show-cause notices and orders alleging that IGST refunds claimed on exports were availed in breach of Rule 96(10) of the CGST Rules, 2017 (and, in some petitions, Rule 89(4B)), because the exporters had separately imported inputs under advance-authorisation/EPCG schemes. Hikal's own show-cause notice dated 04.08.2024 proposed a demand of Rs.67,11,55,626/-; while the petition was pending, Rule 96(10) and Rule 89(4B) were omitted by Notification No. 20/2024 dated 08.10.2024, yet the adjudicating authority still confirmed the demand by order dated 23.01.2025. The Bombay High Court, per Justices M.S. Sonak and Jitendra Jain, decided this batch of over thirty petitions on 11 September 2025.

Issues Involved

  1. Whether Rules 89(4B) and 96(10) of the CGST Rules, 2017 are ultra vires the CGST Act or otherwise unconstitutional.
  2. What is the legal effect of the omission of these Rules by Notification dated 08.10.2024, absent any saving clause, on pending show-cause notices and orders.
  3. Whether Section 6 of the General Clauses Act, 1897, Section 174(3) or Section 166 of the CGST Act, or the Notification's own 'prospective effect' clause, saves such pending proceedings.
  4. Whether any of the impugned orders qualify as 'transactions past and closed' and are thus unaffected by the omission.

Petitioner's Arguments

  • Rules 89(4B) and 96(10) of the CGST Rules were omitted — not repealed and re-enacted — by Notification dated 08.10.2024, and the Notification carried no savings clause preserving pending show-cause notices, adjudication orders, or appeals.
  • Under the well-settled common-law principle, an omission (as opposed to a repeal covered by Section 6 of the General Clauses Act, 1897) obliterates the omitted provision from inception for all purposes, so no proceeding founded on it — unless it had already attained finality as a 'transaction past and closed' — could survive.
  • Section 174(3), Section 166 and Clause 1(2) of the 2024 Notification (giving only 'prospective effect') were none of them true savings clauses capable of preserving pending proceedings, and separately, Rule 96(10) had been declared ultra vires and unconstitutional by the Kerala High Court, an effect that should enure across India.
  • Also argued, on facts, that refunds relating to exports before 09.10.2018 did not even violate Rule 96(10), and that invoking the extended limitation under Section 74 was unjustified absent any allegation of fraud or suppression.

Respondent's Arguments

  • The Revenue contended that the omission of Rules 89(4B) and 96(10) was only prospective, and that Section 6 of the General Clauses Act — or, alternatively, Section 174(3) and Section 166 of the CGST Act, and Clause 1(2) of the Notification itself — operated to save all pending proceedings and orders initiated before 08.10.2024.
  • Argued that the CGST Rules, having been made under Section 164 of the CGST Act, should themselves be treated as a 'Central Act' for the purpose of attracting Section 6 of the General Clauses Act.
  • Submitted that the Kerala High Court's striking down of Rule 96(10) would not bind courts outside Kerala and that several of the impugned orders should be treated as transactions past and closed.

Court Order / Findings

  • The Court held that an omission of a rule, as distinct from its repeal, is not saved by Section 6 of the General Clauses Act, 1897 — which by its own terms applies only to repeals of a 'Central Act' or 'Regulation', not delegated Rules omitted by notification — nor by Section 174(3)/Section 166 of the CGST Act or Clause 1(2) of the 2024 Notification, none of which contains language capable of protecting pending proceedings.
  • Where Rules 89(4B) and 96(10) of the CGST Rules, 2017 were omitted by Notification dated 08.10.2024 without any saving clause, every proceeding founded on those Rules that had not attained finality as a 'transaction past and closed' — including undisposed show-cause notices, unadjudicated orders, and orders under appeal or writ challenge — stands lapsed and cannot be given effect to.
  • The Court quashed and set aside all the impugned show-cause notices and orders-in-original across the batch, and also quashed orders rejecting connected refund applications, restoring them for fresh disposal within four months in light of this declaration, with a fair hearing to the petitioners.
  • The Rule was made absolute in all the petitions without costs, and a subsequent oral request for a stay of the judgment was rejected, since granting a stay would effectively revive the very orders the Court had just declared lapsed.

Important Clarification

  • The omission of a delegated Rule (as opposed to the repeal of a Central Act or Regulation) is not automatically saved by Section 6 of the General Clauses Act, 1897; absent an express saving clause, all pending, non-final proceedings founded on the omitted Rule lapse, even if initiated before the omission.
  • This principle now applies squarely to Rules 89(4B) and 96(10) of the CGST Rules, 2017, omitted with effect from 08.10.2024: show-cause notices, orders-in-original, appeals and refund-rejection orders resting solely on an alleged breach of these Rules are liable to be treated as lapsed unless they had already attained finality before the omission.

Sections Involved

  • Rule 96(10), CGST Rules, 2017 — restricted the IGST refund route for exporters availing certain import benefits; omitted with effect from 08.10.2024.
  • Rule 89(4B), CGST Rules, 2017 — related restriction on refund of accumulated ITC, omitted along with Rule 96(10).
  • Section 6, General Clauses Act, 1897 — savings on repeal of a Central Act/Regulation, held inapplicable to the omission of these Rules.
  • Sections 164, 166 and 174, CGST Act, 2017 — rule-making power and savings provisions considered and held not to protect pending proceedings under the omitted Rules.

Decision – In Favour of

Assessees (petitioners) — all impugned show-cause notices and orders held lapsed and quashed, with refund-rejection orders restored for fresh disposal.

Case Details

Court: High Court of Judicature at Bombay (Ordinary Original Civil Jurisdiction). Case No.: Writ Petition No. 78 of 2025 (lead matter, with over thirty connected Writ Petitions including Yasho Industries, Alkem Laboratories, Astec LifeSciences, Mylan Laboratories and others). Coram: Hon'ble M.S. Sonak and Hon'ble Jitendra Jain, JJ. Date of Order: 11 September 2025 (corrected per speaking-to-minutes order dated 23.09.2025).

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