Rule 96(10) Omission: The "Statutory Vanishing Act" for Refund Recoveries

Rule 96(10) Omission: The “Statutory Vanishing Act” for Refund Recoveries

In a landmark decision (March 2026), the Andhra Pradesh High Court (in the case of Krishna Sai Granites (India) Private Limited) quashed recovery orders that were based on the now-omitted Rule 96(10). This ruling establishes that when a rule is removed without a “saving clause,” it vanishes from the statute book, effectively terminating all pending recovery actions.

The Legal Dispute: Omission vs. Repeal with Savings

The Conflict:

The petitioner, a granite exporter, had been sanctioned IGST refunds for zero-rated exports. However, the Assessing Officer (AO) issued orders in December 2023 to recover these refunds, alleging a violation of Rule 96(10)—a rule that restricted refunds for exporters using certain duty-free import schemes (like Advance Authorization).

The Turning Point:

During the pendency of the writ petition, Rule 96(10) was omitted from the CGST Rules effective 08.10.2024 via Notification No. 20/2024. Crucially, the government did not include a saving clause to preserve ongoing recovery proceedings or show-cause notices initiated under that rule.

The Decision: “When the Rule Dies, the Demand Dies”

The High Court allowed the petition and set aside the recovery orders based on these foundational legal doctrines:

Doctrine of Obliteration: Citing the Supreme Court’s precedent in Kolhapur Canesugar Works Ltd., the Court held that the “omission” of a rule without a saving clause treated the rule as if it never existed for all pending matters.
Vanishing Foundation: Since the entire basis of the recovery was the violation of Rule 96(10), the removal of that rule meant the “statutory foundation” for the demand had disappeared. Without the rule, the AO lacked the authority to enforce the recovery.
Pending vs. Concluded: The Court rejected the Revenue’s argument that the orders were already “concluded.” It clarified that as long as the orders were being challenged in Court, the proceedings were “live” and thus subject to the effect of the omission.

Key Takeaways for Exporters

Check Your Notices: If you have an active Show Cause Notice (SCN) or a recovery order for “wrongful refund” due to Rule 96(10), this ruling provides a definitive defense.
The “Saving Clause” Difference: Unlike an “Amendment” or “Repeal” (which often saves past actions via Section 6 of the General Clauses Act), a “Rule Omission” without specific savings usually extinguishes pending administrative actions.
Liquidity Relief: This ruling effectively halts the “clawback” of refunds for thousands of exporters who utilized duty-free import schemes, significantly easing working capital blockages.
Jurisdictional Support: Similar views have been echoed by the Gujarat, Delhi, and Uttarakhand High Courts, creating a strong national consensus on this issue.

Summary of the Rule 96(10) Status

Before 08.10.2024: Restricted IGST refunds for certain duty-free importers.
After 08.10.2024: Rule omitted from the CGST Rules.
Legal Effect: All pending show-cause notices and non-final recovery orders based on this rule are now invalid and unenforceable.

HIGH COURT OF ANDHRA PRADESH

Krishna Sai Granites (india) (P.) Ltd.

Joint Commissioner of Central Taxes^*

Dhiraj Singh Thakur, CJ.
and R RAGHUNANDAN RAO, J.

WRIT PETITION Nos. 8499 and 8500 of 2024

FEBRUARY 26, 2026

Anil kumar Bezawada, Adv. for the Petitioner. Y N Vivekananda, Deputy Solicitor General of India for the Respondent.

ORDER

1. As both these Writ Petitions raise an identical question of law, they are being disposed of, by way of this common order.

2. Heard Sri Anil Kumar Bezawada, learned counsel appearing for the petitioner and Sri Y.N. Vivekananda, learned counsel appearing for the respondents.

3. In W.P.No.8499 of 2024, the petitioner has approached this Court challenging the provisions of the Rule 96(10) of the Central Goods and Services Tax Rules, 2017 as well as the order in original, dated 21.12.2023, demanding recovery of refund of Rs.11,28,14,285/- sanctioned in relation to the exports for the period November, 2018 to September, 2022.

4. In W.P.No.8500 of 2024, the petitioner has approached this Court challenging the provisions of the Rule 96(10) of the Central Goods and Services Tax Rules, 2017 as well as the order in original dated, 21.12.2023, demanding recovery of refund of Rs.32,91,60,878/- sanctioned in relation to exports carried out for the period November, 2018 to September, 2022.

5. In both these cases, the assessing authority, who passed the orders in original had held that the refund of tax made to the petitioner was barred by Rule 96(10) of the CGST Rules and that such refunds made, wrongfully, required to be recovered.

6. The petitioner being aggrieved by the said orders, had approached this Court, by way of the present Writ Petitions contending that Rule 96(10) of the CGST Rules is unconstitutional and ultra vires the provision of Section 16 of the IGST Act apart from being violative of Article 14 and 19 of the Constitution of India.

7. During the pendency of these Writ Petitions, Rule 96(10) of the CGST Rules came to be omitted w.e.f. 08.10.2024. The learned counsel for the petitioner would contend that the said Rule 96(10) has been omitted without a saving clause. The learned counsel would submit that in such circumstances all the proceedings initiated under such a rule would have to be set aside as they would not survive the omission of Rule 96(10).

8. Sri Y.N. Vivekananda, the learned Standing Counsel for the respondents would submit that the omission of Rule 96(10) of the CGST Rules would not affect the orders in original which are impugned in the present cases.

9. This contention would have to be rejected. The impugned proceedings had been issued on the basis of Rule 96(10) of the CGST Rules. By virtue of its omission, with effect from 08.10.2024, the impugned orders do not have any basis and have to be set aside.

10. A similar view had already been taken in various judgments of this Court including the judgment in Styrax Life Sciences (P) Ltd v. Union of India [Writ Petition Nos. 17221 and 17222 of 2025, dated 19-2-2026].

11. Accordingly, the Writ Petitions are allowed setting aside the impugned orders, dated 21.12.2023, passed by the 1^st respondent in both the cases. There shall be no order as to costs.

12. As a sequel, pending miscellaneous petitions, if any, shall stand closed.