Tridev Resins India Private Limited ... vs Union Of India on 11 September, 2025

Judgment Summary: Tridev Resins India Private Limited vs Union Of India

1. Outcome

The High Court held that the omission of Rules 89(4B) and 96(10) of the Central Goods and Service Tax Rules, 2017 (CGST Rules), via Notification dated October 08, 2024, without any express savings clause or the applicability of Section 6 of the General Clauses Act, 1897, leads to the lapsing of all pending proceedings. This includes undisposed show cause notices, orders passed after October 08, 2024, and orders made before this date that had not attained finality due to pending appeals or challenges. Consequently, the Court quashed and set aside the impugned show cause notices and orders, and directed the authorities to process refund applications without adverting to the omitted rules within four months.

2. Core Issue

The core issue was the legal effect of the omission/repeal of CGST Rules 89(4B) and 96(10) by a subsequent notification on pending proceedings (show cause notices, adjudication orders, and refund applications), specifically concerning:
a. Whether such omission/repeal, without an explicit savings clause, obliterates the rules as if they never existed, thus lapsing pending proceedings.
b. Whether Section 6 of the General Clauses Act, 1897, or any provisions of the CGST Act (Sections 166, 174(3)) or the amending notification (Rule 1(2)) could save these pending proceedings.
c. Whether pending matters constituted "transactions past and closed."

3. Key Facts

• Multiple petitioners challenged the constitutional validity of Rules 89(4B) and/or 96(10) of the CGST Rules, 2017.
• Hikal Limited (lead petitioner) is a manufacturer of chemical intermediates, speciality chemicals, and active pharmaceutical ingredients, operating both as an Export Oriented Unit (EOU) and Domestic Tariff Area (DTA) unit.
• Hikal Limited imported raw materials duty-free under Advance Authorisation licenses (Notification No. 79/2017-Customs) and claimed IGST refunds on exports made with payment of IGST under Section 54 of the CGST Act read with Section 16 of the IGST Act.
• An investigation was initiated against Hikal Limited for the period 2017-18 to 2019-20, alleging violation of Rule 96(10) for IGST refunds, leading to a Show Cause Notice dated August 04, 2024, proposing a GST demand of Rs. 67,11,55,626/-.
• During the pendency of these petitions, the Central Government, through Notification No. 20/2024-Central Tax dated October 08, 2024 (The Central Goods and Service Tax (Second Amendment) Rules, 2024), omitted Rules 89(4B) and 96(10) of the CGST Rules.
• The petitioners contended that the omission was not backed by any savings clause, leading to the lapse of all pending proceedings based on these rules.
• The Revenue, in most cases, could not dispute that the sole allegation in the impugned show cause notices or orders was non-compliance with the conditions of the now-omitted rules.
• The Kerala High Court had previously declared Rule 96(10) as ultra vires and unconstitutional in M/s. Sance Laboratories Pvt. Ltd. Vs. Union of India.

4. Arguments (Taxpayer vs Revenue)

Taxpayer (Petitioners):
* Constitutional Validity: Rules 89(4B) and 96(10) were ultra vires the parent Act and violated Article 14 (manifest arbitrariness, disproportionate effect, frustrating legislative policy). The Kerala High Court had already declared Rule 96(10) unconstitutional, which has nationwide effect (citing Kusum Ingots & Alloys Ltd).
* Effect of Omission: The October 08, 2024 Notification omitted the impugned rules without any savings clause. Therefore, the common law principle applies: an omitted/repealed provision is obliterated as if never enacted, and pending proceedings not reaching final judgment lapse (Rayala Corporation, Kolhapur Cane Sugar Works Ltd.).
* Inapplicability of Section 6 GCA: Section 6 of the General Clauses Act, 1897, applies only to repeals by a "Central Act" or "Regulation," not to rules or subordinate legislation. The omission was by rules, not a Central Act.
* "Transactions Past and Closed": Pending show cause notices or orders under challenge do not constitute "transactions past and closed" and thus are not immune to the effect of the omission.
* Revenue Neutrality: Petitioners would have been eligible for refund under Rule 89, making the situation revenue neutral.
* Limitation: Challenged invocation of extended period under Section 74 CGST Act without fraud, willful misstatement, or suppression.

Revenue (Respondents):
* Constitutional Validity: Rules 89(4B) and 96(10) were constitutional and intra vires the CGST Act; fiscal measures deserve greater latitude. The Kerala High Court's decision should not bind this Court.
* Applicability of Section 6 GCA: Section 6 of the General Clauses Act applies because the 2024 Amendment Rules were enacted under Section 164 of the CGST Act and should be regarded as a "Central Act" for Section 6 purposes (citing Chandpaklal Shah, State of Punjab Vs Mohar Singh, Highpoint Hotels, Laxmi Board and Paper Mills).
* Section 174(3) CGST Act: This provision preserves the general application of Section 6 of the General Clauses Act and saves pending proceedings.
* Rule 1(2) of 2024 Amendment Rules: This clause ("Save as otherwise provided... they shall come into force on the date of their publication...") implies prospective effect and acts as a savings clause, protecting pending proceedings. The GST Council also intended prospective application.
* Section 166 CGST Act: This section, concerning the laying of rules before Parliament, contains a savings clause that protects anything previously done under the rules, thus saving pending proceedings.
* Survival of Main Section: Show cause notices were issued under Section 73 of the CGST Act (read with Section 20 of IGST Act), which has not been repealed; therefore, the notices survive regardless of the rules' omission (citing Jayanthilal Amrathlal).

5. Court’s Reasoning

• Avoidance of Constitutional Issue: The Court explicitly chose not to rule on the constitutional validity of the rules, applying the principle that constitutional questions should only be addressed if absolutely necessary. It found that the petitioners were entitled to relief on the ground of the effect of omission without a savings clause.
• Legal Effect of Omission without Savings Clause: The Court affirmed the common law principle that a statute/rule, upon repeal or omission without a savings clause, is treated as if it never existed, obliterating all inchoate rights and causes of action. Pending proceedings, unless they are "transactions past and closed," lapse.
• "Transactions Past and Closed": The Court clarified that neither pending show cause notices nor orders under challenge (e.g., before Appellate Authorities or the High Court) could be considered "transactions past and closed." Citing Keshavan Madhava Menon, it held that final relief must have been granted by the court of last resort for a transaction to be considered "past and closed."
• Inapplicability of Section 6 GCA:
  • Plain Reading & Precedent: Section 6 of the General Clauses Act applies only to repeals by "this Act" (General Clauses Act itself), a "Central Act" (defined in Section 3(7)), or a "Regulation" (defined in Section 3(50)). The omission of Rules 89(4B) and 96(10) was by a "Rule" (the 2024 Amendment Rules), not a Central Act or Regulation.
  • Supreme Court Constitution Benches: The Court relied on Rayala Corporation Pvt Ltd. and Kolhapur Cane Sugar Works Ltd., where Constitution Benches of the Supreme Court unequivocally held that Section 6 does not apply to the repeal/omission of Rules. It rejected the Revenue's argument that Rayala Corporation was per incuriam or obiter dictum, clarifying that only the distinction between "omission" and "repeal" mentioned therein was later deemed obiter, not the core ratio on Section 6's applicability to Rules.
  • Rejection of "Rules as Central Act" Argument: The argument that rules enacted under Section 164 of the CGST Act should be regarded as a "Central Act" was dismissed, as it would ignore statutory definitions and run contrary to Supreme Court precedents that distinguish between primary legislation (Act) and subordinate legislation (Rules).
• Rejection of Section 174(3) CGST Act Argument: Section 174(3) was enacted out of abundant caution to prevent prejudice to the general application of Section 6 GCA with regard to acts repealed by Section 174(1). It does not amend Section 6 GCA itself to apply to the repeal of Rules. It would be a "tenuous or strained construction" to apply it to rules omitted by separate notification.
• Rejection of Rule 1(2) of 2024 Amendment Rules Argument: Clause 1(2) merely states the effective date of the amending rules (prospective from publication). It is not a savings clause and does not prevent the lapsing of pending proceedings; it only ensures that "transactions past and closed" are not reopened.
• Rejection of Section 166 CGST Act Argument:
  • Section 166 concerns the "laying procedure" for rules before Parliament, which is generally directory, not mandatory (Atlas Cycle Industries Ltd., Veneet Agrawal).
  • The "savings clause" within Section 166 only applies if Parliament modifies or annuls the rules, saving actions taken between publication and modification/annulment. Since no modification or annulment by Parliament was shown, this clause does not apply.
• Survival of Section 73 CGST Act Argument: The argument that Section 73 CGST Act notices survive was rejected. Since the only allegations were specific to the omitted rules, and no other allegations (like evasion) were demonstrated, the substratum of the notices disappeared with the rules. The case of Chandpaklal Ramanlal Shah was distinguished as it involved a charge under a main section that was never omitted.
• Reference to Other High Courts: The Court noted that the Gujarat High Court (M/s Addwrap Packaging Pvt Ltd) and Uttarakhand High Court (M/s Sri Sai Vishwas Polymers) had also taken the same view regarding the lapse of proceedings due to the omission of these rules without a savings clause, and the Revenue had not challenged those decisions.
• Conscious Omission: The Court observed that the Central Government had issued numerous other notifications with explicit savings clauses, implying that the absence of one in this notification was a "conscious choice, made to benefit export, import, and trade."

6. Statutory References

• Central Goods and Service Tax Act, 2017 (CGST Act):
  • Section 54 (Refund of tax)
  • Section 73 (Determination of tax not paid or short paid or erroneously refunded)
  • Section 74 (Determination of tax not paid or short paid or erroneously refunded by reason of fraud etc.)
  • Section 164 (Power to make rules)
  • Section 166 (Laying of rules, regulations and notifications)
  • Section 174 (Repeal and Saving)
  • Section 174(1), 174(2), 174(3)
• Central Goods and Service Tax Rules, 2017 (CGST Rules):
  • Rule 89(4B) (Omitted vide Notification No. 20/2024-Central Tax dated 08.10.2024)
  • Rule 96(10) (Omitted vide Notification No. 20/2024-Central Tax dated 08.10.2024)
• Notification No. 20/2024-Central Tax, dated October 08, 2024:
  • Central Goods and Service Tax (Second Amendment) Rules, 2024
  • Rule 1(2) (Commencement provision)
  • Rule 9 (Omission of Rule 89(4A) and (4B))
  • Rule 10 (Omission of Rule 96(10))
• General Clauses Act, 1897:
  • Section 6 (Effect of repeal)
  • Section 3(7) (Definition of "Central Act")
  • Section 3(50) (Definition of "Regulation")
  • Section 3(51) (Definition of "Rule")
  • Section 24
• Integrated Goods and Services Tax Act, 2017 (IGST Act):
  • Section 16 (Zero-rated supply)
  • Section 20 (Application of provisions of Central Goods and Services Tax Act)
• Constitution of India:
  • Article 14 (Equality before law)
  • Article 226(2) (Power of High Courts to issue certain writs)
• Companies Act, 1956 (referred in petitioner descriptions)
• Divorce Act, 1869: Section 10-A(1)
• Income Tax Act: Section 140-A(3), Section 789969
• Central Excises and Salt Act, 1944: Section 9, 9(1)(b), 11A
• Central Excise Rules: Rules 10, 10-A, 52(A), 56(A), 173(G), 9(2), 173(Q)
• Finance Act, 1994 (referred in Section 174 CGST Act)
• Gold (Control) Ordinance, 1968
• Gold (Control) Act
• Securities and Exchange Board of India Act, 1992: Section 31
• Andhra Pradesh Excise (Arrack & Toddy Licences, General Conditions) Rules, 1969: Rule 24
• AP Excise Act, 1968: Section 72(4)

7. Precedents Cited

1. Kusum Ingots & Alloys Ltd Vs Union of India & Anr (2004) 6 SCC 254
2. Saumya and Thomas Vs Union of India & Ors 2010 (1) KLT 869
3. Commissioner of Income-Tax, Vidarbha Vs Smt. Godavari Devi Saraf 1977 SCC OnLine Bom 215
4. Rayala Corporation (P) Ltd. Vs Director of Enforcement (1969) 2 SCC 412 (Constitution Bench)
5. Kolhapur Cane Sugar Works Ltd. And Anr. Vs Union of India (2000) 2 SCC 536 (Constitution Bench)
6. Fibre Boards (P) Ltd. Vs Commissioner of Income-tax (2015) 10 SCC 333
7. Shree Bhagwati Steel Rolling Mills Vs Commissioner of Central Excise (2015) 326 ELT 209
8. Gammon India Limited Vs Special Chief Secretary & Ors (2006) SCC 354
9. Keshavan Madhava Menon Vs State of Bombay AIR 1951 SC 128
10. M/s Sri Sai Vishwas Polymers Vs Union of India and anr. 2025 (5) TMI 1811 (Uttarakhand HC)
11. M/s Addwrap Packing Pvt Ltd Vs Union of India and Ors 2025 (6) 1156 Gujarat HC
12. Chandpaklal Shah & Anr Vs Reliance Industries Ltd 2017 (354) ELT 289 (SC)
13. State of Punjab Vs Mohar Singh 1954 (2) scc 483
14. M/s Highpoint Hotels Pvt Ltd Vs The Excise Commissioner in Karnataka WP/27575/2017 & connected matters, decided on 18 August 2017.
15. Laxmi Board and Paper Mills Pvt Ltd Vs Union of India & Ors 1991 (51) ELT 329 (BOM)
16. Vianaar Homes Pvt. Ltd Vs Assistant Commissioner 2020 SCC OnLine (Del.) 1394
17. Commissioner of Central Excise, Thane Vs Milton Poly Plast (I) Pvt. Ltd. 2019 (367) ELT 962 (Bom.)
18. Jayanthilal Amrathlal Vs Union of India (1972) 4 SCC 174
19. Bhut Nath Mete V. State of W.B. (1974) 1 SCC 645
20. Sumedico Corpn V. R.P.F. Commr. (1998) 8 SCC 381
21. K. I. Shepherd V. Union of India (1987) 4 SCC 431
22. Central Organisation of T.N. Electricity Employees V. T.N. Electricity Board (2005) 8 SCC 729, 745
23. M/s. Sance Laboratories Pvt. Ltd. Vs. Union of India (WP - C No.17447 of 2023 and other connected matters) disposed of on 10 October 2024 (Kerala High Court)
24. A.M. Sali Maricar And Anr. Vs Income-Tax Officer And Anr (1973) 90 ITR 116 (Madras High Court)
25. Commissioner of Income-Tax Vs Thana Electricity Supply Ltd 1993 SCC OnLine BOM 591
26. Lancy Leo Mendonca & Ors Vs Union of India & Ors 2015 SCC OnLine BOM 5743
27. Qudrat Ullah Vs Municipal Board, Bareilly AIR 1974 SC 396
28. State of Rajasthan Vs Mangilal Pindwal AIR 1996 SC 2181
29. Mohan Raj Vs Dimbeswari Saikia & Anr AIR 2007 SC 232
30. Saurashtra Cements and Chemical Industries Ltd. Vs. Union of India (1995) 79 E.L.T. 367 (Gujarat HC Full Bench)
31. Falcon Tyres Limited Vs. Union of India (1992) 60 E.L.T. 166 (Karnataka HC Division Bench)
32. Atlas Cycle Industries Ltd & Ors Vs State of Haryana (1979) 2 SCC 1996
33. Veneet Agrawal Vs Union of India & Ors (2007) 13 SCC 116
34. Pasupuleti Venkateshwarlu Vs The Motor & General Traders AIR 1975 SC 1409
35. Majati Subbarao Vs. P.V.K. Krishna Rao AIR 1989 SC 2187
36. J. K. Gas, Plant Manufacturing Co., (Rampur), Ltd. v. Emperor (1947) F.C.R. 141
37. Surtees v. Ellison (1829) 9 B. and C. 750
38. Kay v. Goodwin (1830) 6 Bing. 576
39. Wall v. Chesapeake and Ohio Ry. Co. (125 N.E. 20)
40. Prohibition & Excise Supdt v Toddy Toppers Co-op Society (2003) 12 SCC 738
41. Bank of India v OP Swarnakar (2003) 2 SCC 721