Omission of GST Rules 89(4B) and 96(10) Without Savings Clause Causes Pending Proceedings Under Such Rules to Lapse

The Bombay High Court has ruled that the omission of CGST Rules 89(4B) and 96(10) without a savings clause means that any pending legal proceedings based on these rules are now invalid and have lapsed. The court clarified that Section 6 of the General Clauses Act, which typically protects pending proceedings upon repeal, does not apply to subordinate legislation like these rules. Consequently, show cause notices and orders issued under the omitted rules were quashed, and related refund claims must be reconsidered.

The Hon'ble Bombay High Court in Hikal Limited v. Union of India and Ors. [Writ Petition No. 78 OF 2025, order dated September 11, 2025] held that the omission of Rules 89(4B) and 96(10) of the CGST Rules, 2017 without any savings clause to protect pending proceedings results in 'such pending proceedings lapsing' and no longer being sustainable, as the provisions of Section 6 of the General Clauses Act do not apply to repeals or omissions caused by subordinate legislation such as Rules.

Facts:

Hikal Limited ("the Petitioner") is engaged in the manufacture of chemical intermediates and pharmaceutical ingredients and had availed IGST refunds under relevant notifications, which became subject to investigations for alleged non-compliance with Rule 96(10) of the CGST Rules for certain years.

The Union of India and associated tax authorities ("the Respondent") initiated show cause notices and orders against the Petitioner based mainly on non-compliance with Rules 89(4B) and 96(10).

The Petitioner contended that Rules 89(4B) and 96(10) were omitted by notification dated October 8, 2024, through the CGST (Second Amendment) Rules, 2024, which lacks any savings clause; hence, all pending proceedings based on these Rules must lapse.

The Respondent contended that these Rules were valid, not ultra vires CGST Act, with Section 6 of the General Clauses Act and Section 174(3) of the CGST Act protecting pending proceedings despite the omission.

The Petitioner approached the High Court via a writ petition challenging the validity of the proceedings which continued after the omission and sought quashing of show cause notices and related orders.

Issue:

Whether the omission of Rules 89(4B) and 96(10) of the CGST Rules without any savings clause results in the lapse of pending proceedings initiated under these Rules, and whether Section 6 of the General Clauses Act or any other provision saves such pending proceedings?

Held:

The Hon'ble Bombay High Court in Writ Petition No. 78 OF 2025 held as under:

· Observed that, the omission of Rules 89(4B) and 96(10) ("impugned Rules") by the notification dated October 8, 2024, without any savings clause, obliterates these rules from the statute book as if they never existed, except regarding transactions past and closed.

· Noted that, Section 6 of the General Clauses Act, 1897 applies only to repeals by Central Acts or Regulations and not to subordinate legislation like Rules; thus, it cannot save pending proceedings based on omitted Rules.

· Held that, pending proceedings or orders that have not attained finality at the time of omission must lapse; show cause notices and orders predicated solely on the impugned Rules cannot be sustained.

· Held that, the impugned show cause notices and orders are quashed and set aside, and refund claims related to proceedings under omitted Rules are restored for fresh consideration. It also rejected the Respondent's contention relying on Section 174(3) of the CGST Act and Clause 1(2) of the notification as insufficient to save pending proceedings.

· Directed that the relevant authorities dispose of refund applications within four months after affording a fair hearing.

Our Comments:

This decision underscores the fundamental legal principle that omission or repeal of statutory provisions without explicit savings clauses generally extinguishes pending proceedings under such provisions, protecting the principle of legal certainty and finality. The Court relies heavily on settled constitutional and statutory interpretation principles, including those from the SC decision in Kolhapur Cane Sugar Works Ltd. v. Union of India, [(2000) 2 SCC 536], which held that subordinate legislation like rules cannot be elevated to the status of Central Acts for the application of Section 6, General Clauses Act.

The decision aligns with prior rulings such as the Kerala High Court's striking down of Rule 96(10) in M/s. Sance Laboratories Pvt. Ltd. Vs. Union of India [WP - C No.17447 of 2023 and other connected matters]and Uttarakhand High Court in M/s Sri Sai Vishwas Polymers Vs Union of India and anr [2025 (5) TMI 1811], confirming the non-survivability of pending proceedings under omitted rules lacking savings.

Relevant Provisions:

Section 6, General Clauses Act, 1897:

"Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment... the repeal shall not - (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect any investigation, legal proceeding, or remedy in respect of any such right… and any such investigation, legal proceeding or remedy may be instituted, continued or enforced…"

Section 174, CGST Act, 2017

174. Repeal and Saving:

"(3) The mention of the particular matters referred to in sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal…"

Notification No. 20/2024-Central Tax dated October 8, 2024

"10. In the said rules, in rule 96, sub-rule (10) shall be omitted. 11.In the said rules, in rule 96B, in sub-rule (1), for the words and figures "section 73 or 74" the words, figures and letters "section 73 or section 74 or section 74A" shall be substituted with effect from the 1st day of November, 2024….."

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