GST Proceedings Cannot Survive Omitted Rule Without Saving Clause: Calcutta HC

The Calcutta High Court has held that once Rule 96(10) of the CGST Rules was omitted without any saving clause, pending proceedings initiated under the said provision could not legally survive. The Court  quashed the GST demands raised against Techno Waxchem Private Limited.

Techno Waxchem Private Limited filed a writ petition challenging an order-in-original dated February 4, 2025 passed under Section 74(9) of the CGST Act along with consequential demand notices issued in Form GST DRC-07 for the period April 2018 to March 2023. The Revenue alleged that the petitioner violated Rule 96(10) of the CGST Rules by claiming IGST refunds on exports while simultaneously importing goods under the Advance Authorization Scheme.

The petitioner contended that Rule 96(10), which formed the sole basis of the proceedings, had subsequently been omitted from the CGST Rules. It was argued that in the absence of any saving clause, pending proceedings and unresolved tax demands based on the omitted provision could not continue in law.

The primary issue before the Court was whether the omission of Rule 96(10) invalidated pending show cause notices, adjudication orders, and appellate proceedings that had not attained finality as “passed and closed” transactions.

Justice Raja Basu Chowdhury ruled in favour of the petitioner and quashed both the adjudication order and the consequential DRC-07 demands. The Court observed that where a statutory provision is omitted without any saving clause, pending actions under such provision cannot survive unless they relate to transactions that have already become final and closed.

Relying on the Supreme Court’s decision in Kolhapur Canesugar Works Ltd. and various High Court rulings, the Bench clarified that pending show cause notices, assessment orders under challenge, and ongoing appeals do not qualify as “passed and closed” matters. Since the proceedings against the petitioner were still alive and had not attained finality, the omission of Rule 96(10) extinguished the very basis of the demands.

Thus, the Court held that the impugned order and recovery proceedings were unsustainable in law and liable to be set aside.

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