Facts of the Case

EFD Induction Pvt. Ltd. had exported goods and paid IGST which it later sought to reconcile against Rule 96(10) of the CGST Rules, 2017. The Department issued a statement of demand No.10 dated 15.02.2023, along with Form GST DRC-02 of the same date, seeking to recover IGST amounting to Rs.75,55,123/- along with interest, treating the petitioner as ineligible for the refund/credit route under Rule 96(10), which restricts refund of IGST paid on exports where the exporter has availed certain other benefits. The petitioner challenged Notification Nos. 53/2018-CT and 54/2018-CT (which inserted Rule 96(10)) as well as the consequential demand, contending the levy could not survive in light of subsequent judicial pronouncements and departmental action omitting the very rule relied upon.

Issues Involved

  1. Whether a demand raised under Rule 96(10) of the CGST Rules for recovery of IGST refund can survive after the rule has been struck down/read down by other High Courts and subsequently omitted by the Government itself.
  2. Whether the petitioner is entitled to relief on the same terms as granted in M/s Hikal Limited v. Union of India and others (W.P.No.15251/2020, decided 09.12.2025).

Petitioner's Arguments

  • The case is directly and squarely covered by the decision of a coordinate Bench in M/s Hikal Limited v. Union of India and others, where an identical show cause notice and consequential proceedings were quashed with a refund direction.
  • Rule 96(10) had been struck down by the Kerala High Court and other High Courts, including in the Bombay High Court's ruling in the petitioner's own group, and the Central Government had itself omitted Rule 96(10) by notification dated 08.10.2024.

Respondent's Arguments

  • Learned counsel for the respondents submitted that the petition was devoid of merit and liable to be dismissed, without offering any distinguishing feature from the Hikal Limited precedent.

Court Order / Findings

  • The Court held the present case to be directly and squarely covered by its decision in M/s Hikal Limited, where it was held that in view of striking down of Rule 96(10) by other High Courts and the Government's own omission of the Rule, the impugned show cause notice and consequential proceedings deserved to be quashed with a refund direction.
  • The petition was allowed and disposed of in terms of the Hikal Limited decision; the statement of demand No.10 dated 15.02.2023 along with Form GST DRC-02 was quashed.

Important Clarification

  • Once Rule 96(10) of the CGST Rules has been struck down/read down by multiple High Courts and formally omitted by the Central Government by notification, demands raised under it for an earlier period cannot be sustained and are liable to be quashed as a matter of course, following coordinate precedent.
  • Where the very rule underlying a demand no longer survives judicially or in the statute book, the writ court need not independently re-examine the merits and can simply apply the ratio of the earlier binding decision.

Sections Involved

  • Rule 96(10), CGST Rules, 2017 — restriction on refund of IGST paid on export where certain benefits availed (since omitted).
  • Section 16, IGST Act, 2017 — zero-rated supply and refund of unutilised input tax credit.
  • Section 54, CGST Act, 2017 read with Rule 89, CGST Rules, 2017 — refund provisions.

Decision – In Favour of

Assessee. Impugned statement of demand and DRC-02 quashed.

Case Details

High Court of Karnataka at Bengaluru; Writ Petition No. 10540 of 2023 (T-RES); Neutral Citation: 2025:KHC:52372; Coram: Hon'ble Mr. Justice S.R. Krishna Kumar; Order dated 09.12.2025.

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