Gujarat High Court Allows GST Refund Claims After Rule 96(10) Omission - Major Relief for Exporters

The Hon'ble High Court of Gujarat in Messrs Addwrap Packaging (P.) Ltd. v. Union of India, Special Civil Application No. 22519 of 2019, decided on June 13, 2025, held that Notification No.20/2024 Rules, 2024 omitting Rule 96(10) of CGST Rules would apply to all pending proceedings and cases. The Court ruled that the omission of Rule 96(10) would be applicable to pending proceedings/cases where final adjudication has not taken place. The Court observed that recommendations of GST Council to omit Rule 96(10) prospectively would apply to all pending proceedings and cases, enabling exporters to maintain refund claims of IGST paid on export of goods. The Court held that no further proceedings were required to be carried forward and petitioners would be entitled to maintain refund claims. The impugned show cause notices and orders-in-original were quashed and set aside. This judgment provides significant relief to exporters who were denied IGST refunds for using Advance Authorization schemes.

Facts of the Case

The Petitioner, Messrs Addwrap Packaging (P.) Ltd., was engaged in the business of manufacture, supply and export of conductors and Optical Fiber Ground Wires (OPGW) for several years and exported substantial quantity of finished goods manufactured to customers spread across the world. Prior to the implementation of the Central Goods and Services Tax Act, 2017 with effect from July 1, 2017, the inputs and capital goods used by the Petitioner were chargeable to Central Excise duty under the Central Excise Act, 1944 and the input services used by the Petitioner were chargeable to service tax under the Finance Act, 1994. The Petitioner was eligible for availing credit of the taxes paid on inputs, capital goods and input services under the Cenvat Credit Rules, 2004.

The Petitioner applied for Advance Authorisation (AA) License in 2017 under Chapter 4 of the Export-Import policy framed by the Central Government under the provisions of the Foreign Trade (Development and Regulations) Act, 1992 which was allowed by the Director General of Foreign Trade (DGFT). The Petitioner obtained several AA licenses during the period between July 4, 2017 to April 10, 2019 and imported some of the raw materials required in manufacture of finished products utilizing such AA licenses without payment of custom duty while procuring other inputs, capital goods and input services from the domestic market.

With effect from July 1, 2017, GST Act was implemented making necessary amendments in Customs Act, 1962 and Customs Tariff Act, 1975. Instead of levying additional duty of customs equal to the duty of excise chargeable on similar goods produced or manufactured in India, Integrated Goods and Services Tax (IGST) came to be levied on imported goods, whereas goods cleared for export were deemed to be transactions in the nature of inter-state supply of goods under the IGST Act and therefore, IGST was levied and collected on goods exported to foreign countries.

Rule 96(10) of the CGST Rules was inserted for the first time by Notification No.75/2017 dated December 29, 2017 with effect from October 23, 2017. By Notification No.54/2018, sub-rule(10) of Rule 96 was substituted with effect from October 9, 2018. The rule provided that persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which benefit of specified government notifications was availed or availed benefit under certain customs notifications.

The Respondent authorities, on inquiry and investigation, found that the Petitioner was exporting finished goods on payment of IGST and availing benefit of refund in terms of Rule 96(10) of the CGST Rules, despite availing benefit of notifications mentioned in the said Rule. The authorities determined that the Petitioner was not eligible to claim refund on the entire input tax credit availed on procurement of inputs, input services or capital goods from the domestic market as the Petitioner had taken benefit of notifications for procurement of some material either under the Advance Authorisation license or under merchant export.

The Respondent authorities initiated proceedings for recovery of refund already paid to the Petitioner for alleged violation of Rule 96(10) of the CGST Rules on the ground that erroneous refund had been paid where raw materials were imported under Advance Authorisation scheme. The Respondent authorities issued show cause notices and in some petitions, orders-in-original were also passed raising demand for recovery of refund already granted on the ground that sanction of such refund was erroneous.

During the pendency of these matters, GST Council in its 54th meeting recommended to omit Rule 96(10), Rule 89(4A) and Rule 89(4B) of the CGST Rules, 2017 prospectively to simplify and expedite the procedure for refund in respect of exports. Considering the recommendation of the GST Council, CBIC issued Notification No.20/2024-Central Tax dated October 8, 2024 called Central Goods and Services Tax (Second Amendment) Rules, 2024, whereby Rule 96(10) was omitted. The Petitioner was aggrieved by the denial of refund claims and challenged the vires of Rule 96(10) of the CGST Rules as being ultra vires to provisions of section 16 of the IGST Act and section 54(3) of the GST Act, and also challenged the rule on grounds of breach of fundamental rights under Articles 14 and 19(1)(g) of the Constitution of India.

Issue

Whether Notification No.20/2024 dated October 8, 2024 whereby Rule 96(10) has been omitted with effect from the date of notification would be applicable retrospectively to all pending proceedings and cases.

Held by the Court

The Hon'ble High Court of Gujarat in Messrs Addwrap Packaging (P.) Ltd. v. Union of India, Special Civil Application No. 22519 of 2019, decided on June 13, 2025, held that:

• The Court observed that the recommendations of GST Council to omit Rule 96(10) prospectively would apply to all pending proceedings and cases.

  
  

• The Court noted that Notification No.20/2024 Rules, 2024 had been notified and as per Rule 10 of said Rules, Rule 96(10) of CGST Rules has been omitted with prospective effect.

  
  

• The Court held that this would give rise to three situations: firstly, whether the same would be applicable retrospectively, or secondly, same would be applicable prospectively, or thirdly, same would be applicable prospectively but also to "pending proceedings".

  
  

• The Court determined that Rule 10 of Rules, 2024 is applicable prospectively and same also would be applicable to pending proceedings/cases meaning thereby that Rule 96(10) would stand omitted prospectively but applicable to pending proceedings/cases where final adjudication has not taken place.

  
  

• The Court opined that the contention on behalf of the Revenue that the petitioners have filed these petitions challenging validity of Rule 96(10) cannot be said to be pending proceedings was without any basis because the petitioners had also challenged show cause notices as well as orders-in-original passed by respondents by invoking Rule 96(10) for rejecting refund claims of petitioners. The Court held that these petitions were nothing but pending proceedings before Court which had not achieved finality when Notification No.20/2024 came into force with effect from October 8, 2024.

The Court held that in view of the omission of Rule 96(10) by Notification No.20/2024 with effect from October 8, 2024, the question of challenge to vires and validity of rule 96(10) was not required to be considered at this stage. The Court observed that no further proceedings were required to be carried forward and petitioners would be entitled to maintain refund claims of IGST paid on export of goods. The Court concluded that the impugned show cause notices and orders-in-original were to be quashed and set aside, and petitioners were entitled to maintain refund claims for IGST paid for export of goods as per Rule 96 of CGST Rules, 2017 in accordance with law.

Relevant Sections

• Section 16 of Integrated Goods and Services Tax Act, 2017

• Rule 96 of Integrated Goods and Services Tax Rules, 2017

• Rule 10 of Central Goods and Services Tax (Second Amendment) Rules, 2024

• Section 54 of Central Goods and Services Tax Act, 2017

• Articles 14 and 19(1)(g) of Constitution of India

• Section 6 of General Clauses Act, 1897

Pari Materia / Cases Referred

Rayala Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi (1969) 2 SCC 412 - The Supreme Court held that section 6 of General Clauses Act cannot apply on omission of rules and applies when repeal is of Central Act and Regulations and not of Rules.

Mathew M. Thomas and others v. Commissioner of Income Tax (1999) 2 SCC 543 - The Supreme Court held that the word "proceedings" shall include proceedings at appellate stage and legal pursuit of remedy, suit appeal and second appeal are really steps in series of proceedings connected by intrinsic unity.

Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore (2015) 10 SCC 333 - The Supreme Court held that repeal may take any form and so long as statute or part of it is obliterated, such obliteration would be covered by expression "repeal" and even implied repeal would fall within expression "repeal" in General Clauses Act.

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