In a significant relief for exporters and chemical manufacturers, the Bombay High Court on Thursday ruled that show cause notices and refund recovery proceedings under the now-omitted Rules 89(4B) and 96(10) of the CGST Rules cannot be sustained.
The matter, presided over by a Division Bench of Justice G.S. Kulkarni and Justice Firdosh P. Pooniwalla, was heard in a packed courtroom where several petitions, including one filed by Hikal Limited, were clubbed together.
Background
Hikal Limited, a Mumbai-based company engaged in specialty chemicals and pharmaceutical ingredients, had challenged notices issued by the tax department. The dispute revolved around government rules that placed restrictions on exporters claiming GST refunds when they imported raw materials duty-free.
The rules originally inserted to curb double benefits were often criticized by exporters. According to petitioners, they were not only arbitrary but also unconstitutional.
"Once the Government itself deleted the rules in October 2024 without a saving clause, how can unfinished proceedings continue?" senior counsel Mr. Sridharan argued, drawing the court’s attention to similar rulings of the Gujarat and Uttarakhand High Courts .
Court's Observations
The division bench listened patiently as both sides laid out complex statutory interpretations. The petitioners pressed that under established legal principles, an omitted rule is treated as if it never existed, except for cases where disputes are already concluded.
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The judges noted this argument carefully. Referring to earlier Supreme Court cases, the bench remarked:
"Transactions which have not attained finality cannot be treated as past and closed. The State cannot proceed on the basis of rules that no longer exist."
On the government's side, counsel argued that Section 6 of the General Clauses Act should preserve ongoing proceedings despite the omission. But the bench was unconvinced, pointing out that the October 2024 notification had no express saving clause and the legislature could have easily included one if it wishedhikal-limited-622814.
Decision
Finally, the bench ordered that all pending show cause notices and recovery proceedings tied solely to Rules 89(4B) and 96(10) stand quashed. Importantly, it clarified that only proceedings which had reached a final order before the omission date would remain unaffected.
"The omission wipes out the foundation of these proceedings," the court held, adding that any coercive recoveries made must be reconsidered by the authorities in light of this ruling.
With this, the Bombay High Court aligned itself with the approach of other High Courts, effectively shutting the door on the revenue department’s attempts to sustain old refund disputes under deleted provisions.
Case Title:- Hikal Limited vs Union of India & Ors.
Case No.:- Writ Petition No. 78 of 2025
