On omission/repeal of Rules 89(4B) and 96(10) of the CGST Rules, all pending proceedings were not preserved and will stand lapsed.
In a recent judgment, Bombay High Court held that following the omission/repeal of Rules 89(4B) and 96(10) of the CGST Rules. in the absence of any saving clauses or the benefit of Section 6 of the General Clauses Act, all pending proceedings are not preserved and will stand lapsed.
ABCAUS Case Law Citation:
4764 (2025) (10) abcaus.in HC
In the instant case, number of Petitions were filed challenging Rule 89 (4B) and/or 96(10) of the Central Goods and Service Tax Rules, 2017 (CGST Rules). The contention was that upon the omission of these Rules (impugned Rules) vide Notification dated 08 October 2024, notifying The Central Goods and Service Tax (Second Amendment) Rules, 2024 (2024 Amendment Rules), any savings clause does not back such omission, and therefore, all pending proceedings, impugned in these Petitions would stand lapsed.
In all these Petitions, a categorical statement was made that the allegations in the impugned show cause notices, based upon which orders in original had been passed in some cases, the only allegation was about the non-compliance with the conditions prescribed either under Rule 89(4B) or 96(10) of the CGST Rules.
Thus, the main issues involved in all the Petitions relate to the constitutional validity of the Rules and, in any event, to the lapse of pending proceedings consequent upon the repeal or omission of the impugned Rules, which, the Petitioners contended, were not backed by any savings clause.
The Hon’ble High Court opined that the Petitioners were entitled to succeed on the ground that this was a case of omission or repeal of the impugned Rules without any savings clause to protect the pending proceedings. Besides, the provisions of Section 6 of the General Clauses Act were not attracted and therefore, relying upon these provisions, the pending proceedings can claim no immunity or protection.
One of the contentions raised on behalf of some of the Petitioners was that Rule 96(10) of the CGST Rules was already struck down as unconstitutional, null and void by the Kerala High Court. Based upon this, they contended that as held by the Hon’ble Supreme Court, such a striking down will have an effect throughout the territory of India. They further contended that such striking down goes to the nativity, and therefore, any notices or orders alleging or recording the breach of any of the requirements of Rule 96(10), being based upon an ultra vires and unconstitutional Rule, would have to be quashed and set aside.
The Hon’ble High Court noted that the Revenue was not able to show any challenge to the Kerala High Court’s decision declaring Rule 96(10) of the CGST Rules as ultra vires and unconstitutional. The Uttarakhand High Court had also taken cognisance of the Kerala High Court’s decision and proceeded based on its unconstitutionality. The Respondents were also unable to make any statement about the challenge to the Uttarakhand High Court’s decision.
The Hon’ble High Court examined the legal effect of the omission or repeal of the impugned rules without protection of any savings clauses or section 6 of the General Clauses Act.
The Hon’ble High Court observed that impugned rules were not purely procedural but impact substantive rights of the parties. Therefore, the removal or repeal of Rules 89(4B) and 96(10) would essentially erase these Rules from existence as if they had never been enacted or passed, and they should be regarded as provisions that never existed, except in relation to “transactions past and closed” (TPC). Also, an omission or a repeal without any savings clauses would lapse the impugned proceedings or orders unless they qualify as “TPC”.
The Hon’ble High Court held that in cases where the show cause notices did not culminate in any orders, the transaction was not covered by the expression TPC. Not only do such show cause notices become vulnerable, but even the orders made after the date of omission or repeal, i.e. after 08 October 2024, become vulnerable. The show cause notices could not have proceeded any further post the repeal or omission of the impugned Rules. However, in some petitions, the challenge is to orders made by adjudicating authorities before October 08, 2024. However, a challenge to such orders was raised and was pending either before the Appellate Authorities or High Court. In such circumstances, even such orders could not be regarded as final for them to be included in the expression “transactions past and closed”.
The Hon’ble High Court further noted that in the present matter, the notification dated 8 October 2024 by which Rules 89(4B) and 96(10) of the CGST Rules stood omitted or repealed was neither the General Clauses Act nor any Central Act as defined under Section 3(7). So also, the said notification was not some “regulation” as defined under Section 3(50) of the General Clauses Act, 1897. The notification only contained the Central Goods and Services Tax (Second Amendment) Rules, 2024. Therefore, on a plain reading of Section 6 of the General Clauses Act, 1897, to an omission or repeal brought about by the notification dated 08 October 2024, which was nothing but a “Rule”, the provisions of Section 6 of the General Clauses Act, 1897 would not apply.
The Hon’ble High Court further held that the argument that the Notification dated 08 October 2024 or the Central Goods and Service Tax (Second Amendment) Rules, 2024 must be regarded as “Central Act” for the purposes of Section 6 of the General Clauses Act only because such rules were enacted in the exercise of powers conferred upon the Central Government by Section 164 of the CGST Act cannot be accepted. Similar contentions seeking to elevate rules framed under a Central Act to the status of a Central Act have been expressly rejected by the Constitution Bench.
The Hon’ble High Court held that following the omission or repeal of the impugned Rules, i.e., Rules 89(4B) and 96(10) of the CGST Rules via Notification dated 08 October 2024, and in the absence of any saving clauses or the benefit of Section 6 of the General Clauses Act, all pending proceedings—such as undisposed show cause notices, orders disposing of show cause notices issued after 08 October 2024, or even orders made before 08 October 2024 but not yet finalised due to appeals before the Appellate Authorities or challenges before this Court, thus not constituting “transactions past and closed”—are not preserved and will stand lapsed.
Accordingly, the Hon’ble High Court quashed and set aside the impugned show cause notices and the impugned orders in original. It also quashed and set aside the orders refusing some of the Petitioners’ applications for refund, restored those applications to the files of the relevant Authorities, with direction to consider and dispose of such refund applications in light of the decision.
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