Techno Waxchem Private Limited vs. Union Of INDIA And Ors
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Cause title — parties, addresses and appearances
no irregularity in passing the order.
Heard the learned advocates for the respective parties and considered the materials on record. From the sequence of events narrated hereinabove, it is apparent and clear that the petitioner is a registered tax payer and is otherwise bound by the provisions of the said Act. It is also not in dispute that the petitioner between October 2017 and March 2022 had availed a refund of IGST amounting to Rs. 6,28,27,407/-. This according to the petitioner, corresponds to IGST paid during exports as substantiated by shipping bills reflected in ICEGATE portal which validates the refund claims. It is also not in dispute that the provisions of Section 96(10) as amended was in subsistence when the show-cause cum demand notice was issued.
As would appear from the show-cause notice, the petitioner’s director had admitted that the petitioner was unaware of the law and due to wrong interpretation of law had enjoyed undue benefit by availing exemption of IGST on imported goods in one hand and on the other hand, they had encashed the accumulated ITC accrued on account of other goods and services procured indigenously by paying for IGST suo moto for the purpose of the export though, export being zero rated supply, which is contrary to provisions of Rule 96(10). Thus, proceeding fundamentally around non-compliance of Rule 96(10) of the said Rules, the demand was calculated. The petitioner had duly responded to the show-cause and was also afforded a personal hearing. In the operative portion of the order, the Proper Officer has inter alia, pleased to observe as follows:-
From the above, it is clear that the entire proceeding proceeds on the contravention of Rule 96(10) of the said Rules. I find that in the instant case, the petitioner has despite raising the question of constitutional validity of Rule 96 did not insist for the same, since the GST council during the 54th meeting had recommended omission of Rule 96(10) of the said Rules prospectively along with other rules and accordingly the Notification dated 8th October, 2024 was issued omitting Rule 96(10), no proceedings could have been continued on the basis of contravention of such Rule. Even if, any proceeding had been continued before the omission of such rule, on the omission of the rule, all such proceedings came to an end and stood closed.
In this context, I may note that to understand the argument of the petitioner, it would be relevant to consider the effect of the notification dated 8th October, 2024 whereunder Rule 96(10) has stood omitted. I may find that the Hon’ble Supreme Court in the case of Rayala Corporation (P) Ltd. and M.R. Pratap (supra) in no uncertain terms while considering a challenge made to a charge arising out of contravention of Rule 132-A(2) of the Defence of India Rules, 1962 (hereinafter referred to as the “DIR Rules”), on the ground that subsequent to omission of the relevant Rule, no charge could be pressed, by noting the factum of the notification of the Ministry of Home Affairs dated 30th March, 1965 (whereby offences punishable under the said Rules) whereby the said Rule 132-A of the DIR Rules relating to prohibition of dealing in foreign exchange was omitted, and also noting that though that Section 4 of the Foreign Exchange Regulation Act 1947 (in short, the “FERA”) having been amended, legislature did not make any provision that an offence previously committed under Rule 132A of the DRI Rules would continue to remain punishable as an offence of contravention of Section 4(1) of FERA, had held that after omission of Rule 132-A of the DRI Rules, no prosecution could be instituted even in respect of an act which was an offence when the rule was in force. The other aspect as regards the applicability of Section 6 of the General Clauses Act, 1897 was also considered in the above case wherein the Hon’ble Supreme Court in paragraphs 17 and 18 had been, inter alia, pleased to observe as follows:- “17. Reference was next made to a decision of the Madhya Pradesh High Court in State of M.P. v. Hiralal Sutwala [1958 SCC OnLine MP 149 : AIR 1959 MP 93] but, there again, the accused was sought to be prosecuted for an offence punishable under an Act on the repeal of which Section 6 of the General Clauses Act had been made applicable. In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the DIRs for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a rule. If Section 6 of the General Clauses Act had been applied, no doubt this complaint against the two accused for the offence punishable under Rule 132-A of the DIRs could have been instituted even after the repeal of that rule.
The last case relied upon is J.K. Gas Plant Mfg. Co., (Rampur) Ltd. v. R. [1947 SCC OnLine FC 8 : (1947) 9 FCR 141] . In that case, the Federal Court had to deal with the effect of sub- section (4) of Section 1 of the Defence of India Act, 1939 and the Ordinance 12 of 1946, which were also considered by the Allahabad High Court in the case of Seth Jugmendar Das. After quoting the amended sub-section (4) of Section 1 of the Defence of India Act, the Court held: “The express insertion of these saving clauses was no doubt due to a belated realisation that the provisions of Section 6 of the General Clauses Act (10 of 1897), apply only to repealed statutes and not to expiring statutes, and that the general rule in regard to the expiration of a temporary statute is that unless it contains some special provision to the contrary, after a temporary Act has expired, no proceedings can be taken upon it and it ceases to have any further effect. Therefore, offences committed against temporary Acts must be prosecuted and punished before the Act expires and as soon as the Act expires any proceedings which are being taken against a person will ipso facto terminate.” The Court cited with approval the decision in the case of Wicks v. Director of Public Prosecutions, and held that, in view of Section 1(4) of the Defence of India Act, 1939, as amended by Ordinance 12 of 1946, the prosecution for a conviction for an offence committed when the Defence of India Act was in force, was valid even after the Defence of India Act had ceased to be in force. That case is, however, distinguishable from the case before us in two respects. In that case, the prosecution had been started before the Defence of India Act ceased to be in force and, secondly, the language introduced in the amended sub-section (4) of Section 1 of the Act had the effect of making applicable the principles laid down in Section 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry of Home Affairs omitting Rule 132-A of the DIRs did not make any such provision similar to that contained in Section 6 of the General Clauses Act. Consequently, it is clear that, after the omission of Rule 132-A of the DIRs, no prosecution could be instituted even in respect of an act which was an offence when that rule was in force.”
Again, in the case of Kolhapur Canesugar Works Ltd. (supra) the Hon’ble Supreme Court while considering the scope of omission of Rule 10 and 10A of the Central Excise Rules, 1944 with effect from 6th October, 1977 had observed that General Clauses Act is only applicable to a Central Act or Regulation. The same applies only to the repeal of an Act and not to the omission of the Rule. To morefully appreciate the same paragraphs 32, 33 and 34 are extracted hereinbelow:-
We have carefully considered the decisions in Saurashtra Cement and Chemical Industries [(1993) 42 ECC 126 (Guj) (FB)] and Falcon Tyres case [(1992) 60 ELT 116 (Kant)] . Though the judgments in these cases were rendered after the decision of the Constitution Bench in Rayala Corpn. (P) Ltd. [(1969) 2 SCC 412 : (1970) 1 SCR 639] a different view has been taken by the High Courts for the reasons stated in the judgments. The Full Bench of the Gujarat High Court in Saurashtra Cement and Chemical Industries [(1993) 42 ECC 126 (Guj) (FB)] as it appears from the discussions in the judgment, tried to distinguish the decision of the Constitution Bench in Rayala Corpn. [(1969) 2 SCC 412 : (1970) 1 SCR 639] for reasons, we are constrained to say, not sound in law. The decision of the Constitution Bench is directly on the question of applicability of Section 6 of the General Clauses Act in a case where a rule is deleted or omitted by a notification and the question was answered in the negative. The Constitution Bench said that “Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or regulation and not of a rule” (p. 424, para 17 of SCC : p. 656 of SCR).
The Full Bench appears to have lost sight of the position that all the relevant terms i.e. “Central Act”, “enactment”, “regulation” and “rule” are defined in Sections 3(7), 3(19), 3(50) and 3(51) respectively of the General Clauses Act. When the term Central Act or regulation or rule is used in that Act reference has to be made to the definition of that term in the statute. It is not possible nor permissible to give a meaning to any of the terms different from the definition. It is manifest that each term has a distinct and separate meaning attributed to it for the purpose of the Act. Therefore, when the question to be considered is whether a particular provision of the Act applies in a case then the clear and unambiguous language of that provision has to be given its true meaning and import. The Full Bench has equated a “rule” with “statute”. In our considered view this is impermissible in view of the specific provisions in the Act. When the legislature by clear and unambiguous language has extended the provision of Section 6 to cases of repeal of a “Central Act” or “regulation”, it is not possible to apply the provision to a case of repeal of a “rule”. The position will not be different even if the rule has been framed by virtue of the power vested under an enactment; it remains a “rule” and takes its colour from the definition of the term in the Act (the General Clauses Act). At the cost of repetition we may say that the omissions in the judgment in Rayala Corpn. [(1969) 2 SCC 412 : (1970) 1 SCR 639] pointed out in para 17 of the judgment of the Full Bench have no substance as they are not relevant for determination of the question raised for the reasons stated herein.
In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or regulation under an Act after its repeal and re- enactment. In that case Section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in Rayala Corpn. case [(1969) 2 SCC 412 : (1970) 1 SCR 639] . In our considered view the ratio of the said decision squarely applies to the case on hand.”
In this context, I may note that in the judgement of the Bombay High Court in the case of Hikal Limited (supra), an identical question fell for consideration where the Hon’ble Bombay High Court in paragraph 122 thereof by noting the absence of the saving clause was pleased to, inter alia, return the following finding which is extracted hereinbelow:- “122. Upon comprehensive review of all the above aspects, we hold 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.”
The Hon’ble Gujarat High Court has also in the case of Addwrap Packaging (P.) Ltd. (supra) taken a similar view.
The Hon’ble Delhi High Court in the case of Vinayak International Housewares Pvt. Ltd. (supra) while considering the effect of the notification no.20/2025-Central Tax dated 8th October, 2024 as aforesaid, and upon considering the case of Kolhapur Canesugar Works Ltd. (supra), the case of Addwrap Packaging (P.) Ltd. (supra) and the case of Hikal Limited (supra), was pleased to, in paragraph 18 thereof, observe as follows:- “18. A conjoint reading of all the judicial precedents set out above leads to the following conclusions: (i) In the 54th meeting of the GST Council, the recommendation made is relevant, as it clearly observed that Rule 96(10) of CGST Rules leads to unnecessary complication, without any intended benefit and therefore the omission was recommended. (ii) Rule 96(10) of the CGST rules has been omitted with effect from 8th October, 2024 upon the recommendations of the GST Council in its 54th meeting. The Kerala High Court in Sance Laboratories Pvt. Ltd (Supra) has considered the constitutional validity of Rule 96(10) of the CGST rules and has held that, if permitted to stand, the constraints placed upon IGST refunds under Rule 96(10) would run contrary to the provisions of the IGST Act, especially Section 16 of the IGST Act. As evident from the above, the said omission of the said Rule has also been considered by all the other High Courts in above mentioned decisions. (iii) Additionally, various High Courts through the above mentioned decisions, have held that following the decision of the Supreme Court in Kolhapur Canesugar Works (Supra), Rule 96(10) of the CGST rules having been omitted from the Statute, it would also apply to all pending proceedings. The Bombay High Court while considering the same has held that unless and until the transactions have passed and closed, the benefit of omission of Rule 96(10) of the CGST rules has been extended. (iv) All pending SCNs, orders and even appeals filed against orders would not be transactions passed and closed and therefore, the proceedings cannot continue under Rule 96(10) of the CGST rules. The benefit of omission of Rule 96(10) of the CGST rule sought to be extended to all pending proceedings including appeals.”
Having regard to the above, on the omission of Rule 96(10), the order dated 4th February, 2025 no longer survives. The same is accordingly quashed. All consequences shall follow.
There shall be no order as to costs.
Urgent Photostat certified copy of this order, if applied for, be made available to the parties upon compliance of requisite formalities.
(Raja Basu Chowdhury, J.)
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.