Facts of the Case

British Engins India Private Limited challenged Notifications No. 53/2018-CT and 54/2018-CT dated 09.10.2018, which restricted exporters who availed concessional-duty import benefits from claiming refund of unutilised input tax credit on zero-rated exports made under bond/LUT, and sought a mandamus for refund of IGST paid, alternatively seeking amendment of shipping bills to treat its exports as zero-rated supply under LUT and refund of unutilised ITC under Section 16(3)(a) of the IGST Act read with Section 54 CGST Act and Rule 89 CGST Rules. The petitioner relied on a co-ordinate Bench decision in M/s Hikal Limited vs. Union of India (W.P. No. 15251/2020, decided 09.12.2025), which had quashed an identical show cause notice after Rule 96(10) of the CGST Rules was itself omitted by the Government with effect from 08.10.2024, and after the Kerala, Bombay and other High Courts had struck down or read down the provision.

Issues Involved

  1. Whether show cause notices and proceedings founded on Rule 96(10) of the CGST Rules survive after the rule's omission by Notification dated 08.10.2024 and its being struck down by multiple High Courts.
  2. Whether the petitioner is entitled to refund of IGST paid, consistent with the relief granted in Hikal Limited.

Petitioner's Arguments

  • The issue is directly and squarely covered by the decision in M/s Hikal Limited vs. Union of India, where an identical show cause notice founded on Rule 96(10) was quashed and IGST refund with interest was directed.
  • Given the omission of Rule 96(10) itself by the Government and the striking down of the provision by the Kerala and Bombay High Courts, the impugned notice and proceedings could not survive.

Respondent's Arguments

  • The Department submitted that there was no merit in the petition and it was liable to be dismissed, without addressing the Hikal Limited precedent on merits.

Court Order / Findings

  • The Court held that the facts and circumstances were directly covered by Hikal Limited, noting the striking down of Rule 96(10), the judgments of the Kerala and Bombay High Courts, and the Government's own omission of the rule vide Notification dated 08.10.2024.
  • The petition was allowed and disposed of in terms of the Hikal Limited judgment.
  • Respondent authorities were directed to refund the amount payable to the petitioner, along with applicable interest, as expeditiously as possible and in any event within three months from receipt of the order.

Important Clarification

  • Once a restrictive rule such as Rule 96(10) of the CGST Rules stands omitted by the Government itself and has been struck down by co-ordinate High Courts, show cause notices and demand proceedings founded solely on that rule cannot be sustained, irrespective of the exporter's route of import (LUT/bond versus concessional-duty schemes).
  • Refund of IGST wrongly withheld under a since-omitted rule must be released with applicable interest within a defined timeline.

Sections Involved

  • Rule 96(10), CGST Rules, 2017 — restricted IGST refund route for exporters availing certain import benefits (since omitted).
  • Section 16(3), IGST Act, 2017 — governs zero-rated supply and refund options (IGST paid or LUT/bond with ITC refund).
  • Section 54, CGST Act, 2017 read with Rule 89, CGST Rules, 2017 — refund of tax/unutilised ITC.

Decision – In Favour of

Assessee. The petition was allowed in terms of Hikal Limited, with a direction to refund IGST/amount due with interest within three months.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 3938 of 2020 (T-RES)
Neutral Citation: 2025:KHC:52372
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 09.12.2025

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.