Undercarriage And Tractor Parts Pvt. ... vs Union Of India And 3 Others on 11 September, 2025

Outcome**
The Bombay 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 08 October 2024, without any specific saving clauses, renders all pending proceedings based solely on these rules lapsed. Consequently, the Court:
* Quashed and set aside the impugned show cause notices and the impugned orders-in-original issued against the petitioners.
* Quashed and set aside orders refusing petitioners' refund applications that were based on non-compliance with the omitted rules.
* Restored the refund applications to the files of the relevant authorities and directed their disposal within four months, in light of the ruling on the omission of the impugned Rules.
The Court explicitly rejected the Revenue's motion for a stay on the judgment.

2. Core Issue
The core issues revolved around:
* The legal effect of the omission/repeal of Rules 89(4B) and 96(10) of the CGST Rules, 2017, by a subsequent notification dated 08 October 2024 (Central Goods and Services Tax (Second Amendment) Rules, 2024), particularly in the absence of any express saving clause.
* Whether Section 6 of the General Clauses Act, 1897, or any other provision in the CGST Act (Sections 166, 174(3)) or the amending Rules (Clause 1(2)), operated to save pending proceedings (show cause notices, adjudication orders, or refund rejections) initiated under the omitted rules.
* Whether the impugned Rules were ultra vires the CGST Act or unconstitutional.

3. Key Facts
* The petitioners, including Hikal Limited (the lead petitioner), are manufacturers and exporters of various goods.
* They claimed IGST refunds on exports made with payment of IGST, or imported raw materials duty-free/with IGST exemption under various Customs Notifications/Advance Authorisation licenses.
* Investigations were initiated by the Department (around 2022) for the period 2017-18 to 2019-20, alleging that IGST refunds claimed by petitioners violated Rule 96(10) of the CGST Rules (e.g., due to imports against advance authorisation licenses).
* Show Cause Notices (SCNs) were issued (e.g., to Hikal Limited on 04.08.2024 for GST demand of approx. Rs. 67.11 Crores).
* During the pendency of these proceedings, Rule 89(4B) and Rule 96(10) of the CGST Rules were omitted (repealed) by Notification No. 20/2024-Central Tax dated 08 October 2024 (The Central Goods and Services Tax (Second Amendment) Rules, 2024).
* Petitioners argued that this omission, lacking an express saving clause, should lead to the lapse of all pending proceedings.
* Despite the omission of the rules and the pendency of a writ petition, the Joint Commissioner passed an order-in-original (23.01.2025) confirming demand, interest, and penalty against Hikal Limited.
* The core allegation in all impugned SCNs and orders was solely the non-compliance with the conditions prescribed under the now-omitted Rules 89(4B) or 96(10).

4. Arguments

Taxpayer (Petitioners - Mr. V. Sridharan, Sr. Adv. & others):
* Constitutional Validity: Rules 89(4B) and 96(10) were ultra vires the CGST Act, manifestly arbitrary, disproportionate, discriminatory (violating Article 14), and frustrated legislative/executive policy.
* Kerala HC Precedent: The Kerala High Court had already declared Rule 96(10) unconstitutional (M/s. Sance Laboratories Pvt. Ltd.), which should apply throughout India, rendering any notices/orders based on it invalid.
* Effect of Omission: The omission of Rules 89(4B) and 96(10) was not backed by any saving clause. Under common law, a repealed/omitted provision is obliterated as if it never existed, causing all pending proceedings (not "transactions past and closed") to lapse.
* Inapplicability of Section 6 GCA: Section 6 of the General Clauses Act, 1897, applies only to the repeal of a "Central Act" or "Regulation," not to the omission/repeal of "Rules" (subordinate legislation). The 2024 Amendment Rules are "Rules."
* "Transactions Past and Closed": The impugned SCNs and orders, which were still under challenge or pending adjudication, had not attained finality and therefore did not qualify as "transactions past and closed."
* Other HC Rulings: Gujarat and Uttarakhand High Courts had already taken a similar view, holding that pending proceedings/orders based on the omitted rules were not saved.
* Revenue Neutrality: Petitioners would have been eligible for refunds under Rule 89, making the situation revenue neutral.
* Saving Clauses: Neither Rule 1(2) of the 2024 Amendment Rules nor Section 166 of the CGST Act could be construed as a saving clause for pending proceedings.

Revenue (Respondents - Mr. J. B. Mishra & others):
* Constitutional Validity: Rules 89(4B) and 96(10) were constitutional and valid fiscal measures. The Kerala HC decision was not binding and could be distinguished.
* Applicability of Section 6 GCA: Section 6 of the General Clauses Act applied because the 2024 Amendment Rules were made under Section 164 of the CGST Act and thus should be considered a "Central Act" for the purposes of Section 6.
* Section 174(3) CGST Act: This section ensures the general application of Section 6 of the General Clauses Act, thereby saving pending proceedings.
* Rule 1(2) as Saving Clause: Clause 1(2) of the 2024 Amendment Rules ("Save as otherwise provided in these rules, they shall come into force...") implies prospective application, thereby saving prior actions and pending proceedings. GST Council recommendations also indicated prospective operation.
* Section 166 CGST Act: The saving clause within Section 166 (regarding rules laid before Parliament) protects anything previously done under the rules, including pending proceedings. Furthermore, rules do not come into force until approved by Parliament.
* Survival of SCNs: The SCNs were issued under Section 73 of the CGST Act (read with Section 20 of the IGST Act), which remains in force, and therefore, the SCNs survive regardless of the omission of the specific rules.

5. Court’s Reasoning
* Constitutional Validity (First Issue): The Court declined to rule on the constitutional validity of the impugned Rules, following the principle that such issues should only be addressed if absolutely necessary. It found that the petitions could be disposed of on the issue of the legal effect of the rules' omission.
* Effect of Omission/Repeal (Second & Third Issues):
* The Court affirmed the common law principle that a statute or rule, upon repeal or omission without a saving clause, is treated as if it never existed, destroying all inchoate rights and causes of action. This means no proceedings can be commenced or continued under such obliterated provisions, except for "transactions past and closed."
* It held that Rules 89(4B) and 96(10) were substantive provisions, not merely procedural.
* Crucially, the Court determined that show cause notices, orders passed after the date of omission, or orders that were challenged and pending before appellate authorities or the High Court did not constitute "transactions past and closed."
* Cited with approval the Gujarat and Uttarakhand High Court decisions (M/s Addwrap Packing Pvt Ltd, M/s Sri Sai Vishwas Polymers) that granted relief in similar circumstances.
* Inapplicability of Section 6 GCA (Fourth Issue):
* A strict interpretation of Section 6 of the General Clauses Act shows it applies only to the repeal of a "Central Act" or "Regulation," not to "Rules" (subordinate legislation).
* The Court relied on two Constitution Bench decisions of the Supreme Court (Rayala Corporation (P) Ltd. and Kolhapur Cane Sugar Works Ltd.) which conclusively established that Section 6 GCA does not apply to the repeal or omission of rules.
* The argument that Rayala Corporation was obiter dictum was rejected, clarifying that later Supreme Court judgments only departed from the distinction between "omission" and "repeal" but upheld the core ratio regarding Section 6's non-applicability to rules.
* Rules under Section 164 CGST Act not "Central Act" (Fifth Issue):
* Rules framed under a Central Act (like CGST Rules under Section 164 CGST Act) cannot be elevated to the status of a "Central Act" for the purpose of Section 6 GCA.
* The Supreme Court in Kolhapur Cane Sugar Works Ltd. had explicitly overruled High Court decisions (e.g., Gujarat and Karnataka) that had held otherwise.
* Section 174(3) CGST Act Inapplicable (Sixth Issue):
* Section 174(3) is an abundance of caution clause ensuring general application of Section 6 GCA for repeals under Section 174(1) and (2). It does not expand the scope of Section 6 GCA itself or implicitly amend it to cover omission of rules.
* Thus, if Section 6 GCA does not apply to the omission of rules, Section 174(3) does not make it applicable.
* Clause 1(2) of Notification not a Saving Clause (Seventh Issue):
* Clause 1(2) ("Save as otherwise provided...") merely specifies the effective date of the 2024 Amendment Rules as prospective (08.10.2024). It is not a saving clause designed to preserve pending proceedings.
* The Court noted that the prospective nature was likely to avoid reopening "transactions past and closed," not to save pending, unconcluded matters.
* Section 166 CGST Act Inapplicable (Eighth Issue):
* Section 166 deals with the laying of rules before Parliament, which is generally a directory requirement, not mandatory. Rules become effective upon gazette notification.
* The saving provision within Section 166 applies only if Parliament modifies or annuls the rules, and it saves things done between notification and modification/annulment. Since no such modification or annulment was shown to have occurred, this saving clause was not triggered.
* The argument that rules require Parliament's approval before coming into force was rejected as inconsistent with the plain language of Section 166.
* Distinguishing Revenue's Precedents: The Court found Revenue's cited precedents (Chandpaklal Ramanlal Shah, Jayanthilal Amarathlal, Vianaar Homes Pvt. Ltd., Milton Poly Plast (I) Pvt. Ltd., State of Punjab Vs Mohar Singh) distinguishable as they dealt with different factual scenarios (e.g., charges under main Acts, repeal with re-enactment, or existence of actual saving clauses). The key distinction was that the allegations in the present case were solely based on the rules that had been omitted.
* Conscious Choice: The Court noted that the government had issued 64 other notifications amending/omitting rules that did contain explicit saving clauses, suggesting the absence of such a clause in the 08 October 2024 Notification was a deliberate choice, possibly to benefit trade.

6. Statutory References
* Central Goods and Services Tax Act, 2017 (CGST Act): Sections 16, 54, 73, 74, 164, 166, 174(1), 174(2), 174(3).
* Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 89(4B), Rule 96(10).
* Central Goods and Services Tax (Second Amendment) Rules, 2024: Clause 1(2).
* General Clauses Act, 1897: Sections 3(7) ("Central Act"), 3(50) ("Regulation"), 6, 6(1), 24.
* Integrated Goods and Service Tax Act, 2017 (IGST Act): Section 20.
* Constitution of India: Articles 14, 226(2).
* Other Statutes/Rules (referenced in discussion of precedents): Companies Act, 1956; Divorce Act, 1869 (Section 10-A(1)); Income Tax Act (Section 140-A(3)); Securities and Exchange Board of India Act, 1992 (Section 31); Central Excise Rules (Rules 10, 10-A, 52(A), 56(A), 173(G), 9(2), 173(Q)); Central Excises and Salt Act, 1944 (Sections 9, 9(1)(b), 11(A)); Gold (Control) Ordinance, 1968; Gold (Control) Act; Andhra Pradesh Excise (Arrack & Toddy Licences, General Conditions) Rules, 1969 (Rule 24); AP Excise Act, 1968 (Section 72(4)).

7. Precedents Cited
1. M/s. Sance Laboratories Pvt. Ltd. Vs. Union of India (Kerala High Court)
2. Kusum Ingots & Alloys Ltd Vs Union of India & Anr (2004) 6 SCC 254
3. Saumya and Thomas Vs Union of India & Ors 2010 (1) KLT 869
4. Commissioner of Income-Tax, Vidarbha Vs Smt. Godavari Devi Saraf 1977 SCC OnLine Bom 215
5. Rayala Corporation (P) Ltd. Vs Director of Enforcement (1969) 2 SCC 412
6. Kolhapur Cane Sugar Works Ltd. And Anr. Vs Union of India (2000) 2 SCC 536
7. Fibre Boards (P) Ltd. Vs Commissioner of Income-tax (2015) 10 SCC 333
8. Shree Bhagwati Steel Rolling Mills Vs Commissioner of Central Excise (2015) 326 ELT 209
9. Gammon India Limited Vs Special Chief Secretary & Ors (2006) SCC 354
10. Keshavan Madhava Menon Vs State of Bombay AIR 1951 SC 128
11. Wall v. Chesapeake and Ohio Ry. Co. (125 N.E. 20)
12. M/s Sri Sai Vishwas Polymers Vs Union of India and anr. 2025 (5) TMI 1811 (Uttarakhand High Court)
13. M/s Addwrap Packing Pvt Ltd Vs Union of India and Ors 2025 (6) 1156 Gujarat HC (Gujarat High Court)
14. Chandpaklal Ramanlal Shah v. Union of India 2017 (354) ELT 289 (SC)
15. State of Punjab Vs Mohar Singh 1954 (2) SCC 483 (also AIR 1955 SC 84)
16. M/s Highpoint Hotels Pvt Ltd Vs The Excise Commissioner in Karnataka (WP/27575/2017, Karnataka High Court, 18.08.2017)
17. Laxmi Board and Paper Mills Pvt Ltd Vs Union of India & Ors 1991 (51) ELT 329 (BOM)
18. Vianaar Homes Pvt. Ltd Vs Assistant Commissioner 2020 SCC OnLine (Del.) 1394
19. Commissioner of Central Excise, Thane Vs Milton Poly Plast (I) Pvt. Ltd. 2019 (367) ELT 962 (Bom.)
20. Bhut Nath Mete V. State of W.B. (1974) 1 SCC 645
21. Sumedico Corpn V. R.P.F. Commr. (1998) 8 SCC 381
22. K. I. Shepherd V. Union of India (1987) 4 SCC 431
23. Central Organisation of T.N. Electricity Employees V. T.N. Electricity Board (2005) 8 SCC 729
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 High Court)
31. Falcon Tyres Limited Vs. Union of India (1992) 60 E.L.T. 166 (Karnataka High Court)
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 (also AIR 2008 SC 351)
34. Prohibition & Excise Supdt v Toddy Toppers Co-op Society (2003) 12 SCC 738
35. Bank of India v OP Swarnakar (2003) 2 SCC 721
36. Pasupuleti Venkateshwarlu Vs The Motor & General Traders AIR 1975 SC 1409
37. Majati Subbarao Vs. P.V.K. Krishna Rao AIR 1989 SC 2187