Omission of Rule 96(10): Finality to an unnecessary GST export refund litigation

Supreme Court Holds Omitted Rule 96(10) Applies to Pending GST Refund Proceedings

Summary: The controversy concerns the effect of omission of Rule 96(10) of the CGST Rules, 2017 on pending disputes relating to IGST refunds on exports. Rule 96(10) restricted refund of IGST paid on exports where specified exemption or concessional benefits had been availed. The Government omitted Rule 96(10), along with Rules 89(4A) and 89(4B), through Notification No. 20/2024-Central Tax dated 8-10-2024. The Gujarat High Court in Addwrap Packaging (P.) Ltd. v. Union of India, the Delhi High Court in Vinayak International Housewares (P.) Ltd. v. Union of India, and the Bombay High Court in Hikal Limited v. Union of India considered the impact of the omission on pending proceedings. The controversy was ultimately resolved by the Supreme Court in Goodluck India Limited & Anr. v. Union of India & Ors., 2026 INSC 821, decided on 6-8-2026, holding that omission of Rule 96(10), in the absence of a saving clause, applies to pending proceedings. The Supreme Court rejected the contention that the GST Council’s recommendation for prospective omission preserved pending proceedings, dismissed the Revenue appeals, and dismissed the connected SLPs challenging the vires of Rule 96(10) as infructuous. Consequently, proceedings under Rule 96(10) which had not attained finality on 8-10-2024 cannot continue merely on the basis of the omitted restriction.

Introduction

The provision of Rule 96(10) of the CGST Rules, 2017 placed restrictions on refund of integrated tax paid on exports where the exporter or its supplier had availed specified exemption or concessional benefits. What was ostensibly conceived as an anti-double-benefit mechanism eventually became a significant source of litigation, particularly for exporters importing inputs under schemes such as Advance Authorisation. The controversy has now entered an important phase following the omission of Rule 96(10) by Notification No. 20/2024-Central Tax dated 8-10-2024. The omission itself reflected a significant change in policy. The Government ultimately accepted that continuation of the restriction was unnecessary, and the provision disappeared from the statutory framework. The more difficult question, however, was what would happen to demands, show-cause notices, refund disputes, appeals and writ petitions relating to earlier periods which had not attained finality as on 8-10-2024. A substantial body of High Court jurisprudence has now developed in favour of exporters. The Gujarat High Court in the group of matters led by Addwrap Packaging (P.) Ltd. v. Union of India held that although the omission operates prospectively from 8-10-2024, it equally applies to proceedings which were pending on that date and had not attained finality. The Delhi High Court subsequently adopted the same approach and extended the benefit even to pending show-cause notices, orders and appeals. Similar reasoning has been adopted by other High Courts. On 6-8-2026, Supreme Court finally decided Goodluck India Limited & Anr. v. Union of India & Ors., 2026 INSC 821 and, substantially affirmed exporters’ position and settled central controversy in their favour. Court held that omission of Rule 96(10) by Notification No. 20/2024-Central Tax dated 8-10-2024 without any saving clause applies to pending proceedings. It expressly relied upon Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 and found no reason to interfere with High Court view.

What Rule 96(10) sought to achieve?

Rule 96 deals with refund of integrated tax paid on goods or services exported out of India. Under the GST framework, exports are zero-rated supplies and the legislative policy embodied in section 16 of the Integrated Goods and Services Tax Act, 2017 is that taxes should ordinarily not be exported. Rule 96(10), however, carved out an important restriction. Broadly stated, an exporter who had received supplies on which specified concessional or exemption benefits had been availed was prevented from claiming refund of IGST paid on exports in the manner contemplated by Rule 96. The exporter was effectively required to adopt the alternative route of export under bond or Letter of Undertaking and claim refund of accumulated input tax credit, subject to the applicable statutory conditions. The provision created particular difficulties for exporters operating under Advance Authorisation and similar schemes. An exporter importing inputs without payment of customs duties could find itself denied the otherwise available route of exporting goods on payment of IGST and claiming refund thereof. This led to demands for recovery of refunds already granted, withholding of refunds, issuance of show-cause notices and extensive litigation before different High Courts. The difficulty was compounded by repeated amendments to Rule 96(10), questions concerning its retrospective operation and disputes as to whether the rule travelled beyond the substantive provisions governing zero-rated supplies. Thus, what was intended to prevent unintended double benefit evolved into a disproportionately complex restriction affecting genuine exporters.

Government itself ultimately reconsidered restriction

The significance of Notification No. 20/2024-Central Tax dated 8-10-2024 must be understood against this background. By the notification, Rule 96(10) was omitted. The corresponding special provisions in Rules 89(4A) and 89(4B) were also removed as part of the rationalisation of the refund mechanism. The policy background is relevant. The GST Council had considered the difficulties created by the existing arrangement and recommended removal of the restriction. The Gujarat High Court, while examining the effect of the amendment, noted the policy material surrounding the omission and ultimately held that Notification No. 20/2024 applies to pending proceedings where final adjudication had not taken place. The omission therefore cannot be viewed merely as an accidental drafting change. It represents a conscious abandonment of a particular restriction in the export-refund architecture. This distinction becomes important when deciding what should happen to disputes which were alive on 8-10-2024.

Prospective omission does not necessarily mean survival of pending proceedings

Much of the Revenue’s argument has centred around the proposition that the GST Council recommended omission of Rule 96(10) prospectively. From this it is contended that transactions relating to periods prior to 8-10-2024 must continue to be governed by the old rule. This argument overlooks an important distinction between retrospective operation of an amendment and the effect of omission upon pending proceedings. To say that Notification No. 20/2024 operates prospectively means that Rule 96(10) stood omitted from 8-10-2024 and not from some anterior date. It does not automatically follow that a proceeding which remained undecided on 8-10-2024 can continue indefinitely under a provision which no longer exists. The Gujarat High Court articulated precisely this distinction. It identified three possible situations: retrospective application, prospective application only to future matters, and prospective operation coupled with application to proceedings pending on the date of omission. The Court adopted the third approach. It held that Rule 96(10) was omitted prospectively, but that the omission applied to proceedings and cases which had not attained finality on 8-10-2024. Consequently, no further proceedings under Rule 96(10) were required to be carried forward and the exporters were entitled to maintain their IGST refund claims. This distinction is central to the entire controversy.

5. Constitution Bench principle in Kolhapur Canesugar Works

The jurisprudential foundation of the exporters’ case lies in the Constitution Bench judgment of the Supreme Court in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 : 2000 (119) E.L.T. 257 (S.C.). The controversy in Kolhapur Canesugar concerned proceedings initiated under Rules 10 and 10A of the Central Excise Rules after the relevant provisions had been omitted. The Constitution Bench examined the effect of omission in the absence of a saving provision. The Court held, in substance, that where a provision is unconditionally omitted and there is no saving clause protecting pending proceedings, the proceeding cannot simply continue under the vanished provision. The Court found that neither the notification effecting the omission nor the subsequently introduced statutory provision preserved the proceedings initiated under the deleted rules. The consequence was that the pending proceedings lapsed. This principle assumes special importance in the Rule 96(10) controversy because Notification No. 20/2024 did not expressly provide that notwithstanding its omission, Rule 96(10) would continue to govern pending refund disputes or proceedings relating to earlier exports. Had the rule-making authority intended such proceedings to survive, it could have said so expressly.

Importance of absence of a saving clause

A saving clause performs an important legislative function. When a statutory provision is repealed, omitted or substituted, the legislature or rule-making authority can expressly preserve accrued liabilities, pending proceedings, investigations, adjudications or appeals. Once such a clause exists, the legal consequences are governed by its language. Notification No. 20/2024 presents a different situation. Rule 96(10) was omitted, but the notification did not expressly provide that proceedings already initiated under the rule would continue as if the rule remained in force. This omission is not insignificant. The Constitution Bench reasoning in Kolhapur Canesugar specifically recognised the importance of such a saving mechanism. Where there is no applicable statutory saving and the provision supporting the proceeding has disappeared, continuation of the proceeding becomes legally vulnerable. The Andhra Pradesh High Court applied this very principle in B.V.L. Granites v. Union of India, holding that proceedings initiated under an omitted provision may continue only where their continuation is protected by an appropriate saving mechanism. Since Rule 96(10) was omitted without such protection, the pending proceedings could not survive. The Court accordingly set aside the assessment orders and held that amounts recovered under those proceedings were liable to be refunded.

Gujarat High Court: Addwrap Packaging and connected cases

The Gujarat High Court’s decision in Addwrap Packaging (P.) Ltd. v. Union of India, decided on 13-6-2025, is presently one of the most important authorities on the subject. The Court dealt comprehensively with a large group of petitions involving Rule 96(10). After examining the statutory history, GST Council recommendations, the nature of the omission and the law governing omitted provisions, the Court rejected the Revenue’s contention that the pending writ petitions could not obtain the benefit of the omission. The Court held that Notification No. 20/2024 is prospective but nevertheless applies to all pending proceedings and cases where final adjudication had not taken place. It consequently held that no further proceedings were required to be carried forward under Rule 96(10), quashed the impugned show-cause notices and orders-in-original and recognised the exporters’ entitlement to maintain refund claims of IGST paid on exports in accordance with Rule 96. The judgment is important because it avoids the conceptual error of describing the relief as a retrospective repeal. The Court instead focuses upon the legal status of an uncompleted proceeding after the statutory foundation supporting it has disappeared.

Delhi High Court extends the principle to SCNs, orders and appeals

The jurisprudence was further strengthened by the Delhi High Court in Vinayak International Housewares (P.) Ltd. v. Union of India, decided on 20-11-2025. After considering the decisions of various High Courts, the Delhi High Court observed that pending show-cause notices, adjudication orders and even appeals against such orders could not be regarded as transactions which had finally passed and closed. Accordingly, the benefit flowing from the omission of Rule 96(10) was extended to such pending proceedings. In one of the connected petitions, proceedings were merely at the summons stage and were quashed. In another, the show-cause notice and consequential orders were quashed notwithstanding that the assessee was in the process of filing an appeal. Similar relief was granted in the other connected matter. This is an important development because it broadens the practical meaning of “pending proceedings.” The benefit is not confined to a refund application physically pending before the original authority. Where the controversy remained alive in adjudication, appeal or judicial proceedings and had not attained finality, the underlying proceeding continued to be pending.

Line of High Court decisions is becoming increasingly consistent

The Gujarat and Delhi decisions do not stand in isolation. The Andhra Pradesh High Court in B.V.L. Granites followed the same approach and set aside assessment orders passed after omission of Rule 96(10). The Calcutta High Court has likewise considered the effect of omission and the developing jurisprudence in cases concerning the rule. The significance of this convergence should not be underestimated. Different High Courts have approached the controversy through the same basic legal proposition: once Rule 96(10) was omitted without an express saving of pending proceedings, an unfinished proceeding could not ordinarily continue to impose the restriction contained in the omitted rule.

GST Council recommendation cannot substitute statutory text

Another important dimension concerns the legal status of the GST Council’s recommendation that the omission should operate prospectively. The recommendation undoubtedly explains the policy background. It cannot, however, substitute the language ultimately employed by the delegated legislation. The legal consequences of Notification No. 20/2024 have to be determined from the notification itself, read with the parent statute and applicable principles of statutory interpretation. If the Government intended to say that all proceedings relating to exports made before 8-10-2024 would continue under Rule 96(10), notwithstanding its omission, such intention could have been embodied in an express saving provision. The distinction assumes added importance after the Supreme Court’s constitutional exposition of the status of GST Council recommendations. Recommendations of the Council occupy a position of considerable constitutional and persuasive importance in the cooperative federal structure, but they are not by themselves substitutes for enacted legislation or validly framed rules. Consequently, an intention discerned from Council deliberations cannot ordinarily supply a saving clause which the final notification itself does not contain.

What amounts to a ‘pending proceeding’?

The next practical question is perhaps more important than the abstract debate about prospectivity. What proceedings qualify for the benefit? The developing jurisprudence indicates that the expression should include refund proceedings pending before the proper officer, pending show-cause notices, adjudication proceedings, orders under challenge in statutory appeals and writ petitions where the controversy had not attained finality on 8-10-2024. The Gujarat High Court expressly treated proceedings pending before the Court as well as before the adjudicating authority as covered. The Delhi High Court went further in practical terms and recognised that even where an order had been passed and the assessee was pursuing the appellate remedy, the transaction was not necessarily “past and closed.” The expression “pending” therefore needs to be understood with reference to finality, rather than merely the stage of departmental adjudication. A distinction may nevertheless survive in respect of cases which had already attained complete finality before 8-10-2024—for example, where the assessee accepted the demand, no appeal or other proceeding remained pending and the matter had become conclusively closed. Such cases stand on a materially different footing from live disputes.

Consequences for refund claims already rejected

The decisions have major implications for exporters whose refund claims were rejected solely or substantially because of Rule 96(10). Where the rejection was under challenge on 8-10-2024, the exporter has a strong basis to contend that the restriction can no longer be applied. Depending upon the procedural stage, the appropriate consequence may be quashing of the show-cause notice, setting aside of the adjudication order, disposal of the appeal in favour of the exporter or reconsideration of the refund claim without applying Rule 96(10). This does not necessarily mean that every refund must automatically be paid. The exporter must still satisfy the other statutory requirements governing zero-rated supplies and refunds. What disappears is the specific disqualification created by Rule 96(10). That distinction is important. Omission of Rule 96(10) removes the impugned restriction; it does not dispense with the remaining requirements of the CGST Act, IGST Act and Rules.

Advance Authorisation exporters were unnecessarily caught in prolonged litigation

The practical history of the provision also deserves attention. An exporter importing inputs without payment of duty under Advance Authorisation was effectively told that because the upstream import enjoyed exemption, the exporter could not choose the IGST-payment-and-refund route and was required to export under LUT/bond. This produced a peculiar situation. The exports remained zero-rated. There was ordinarily no allegation that the goods had not actually been exported. The controversy centred around the route through which the zero-rating benefit was monetised. The Government’s eventual decision to omit Rule 96(10) itself demonstrates that continuation of this restrictive mechanism was no longer considered necessary. Against this background, pursuing years-old demands against exporters whose proceedings had not attained finality would perpetuate precisely the administrative complexity that the omission sought to eliminate. Tax administration should ultimately facilitate exports rather than convert a choice of refund mechanism into years of litigation where there is no allegation of fictitious exports or fraudulent refund.

Supreme Court finally settles controversy

Controversy has now received authoritative resolution from Supreme Court in Goodluck India Limited & Anr. v. Union of India & Ors., 2026 INSC 821, decided on 6-8-2026. Revenue had challenged High Court view that omission of Rule 96(10) by Notification No. 20/2024-Central Tax dated 8-10-2024 would apply to proceedings which were pending on date of omission. Supreme Court rejected Revenue’s contention and held that omission of Rule 96(10), in absence of any saving clause, would enure to benefit of assessees in pending proceedings. Court applied Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 : 2000 (119) E.L.T. 257 (S.C.), holding its principle squarely applicable. GST Council’s recommendation that omission should operate prospectively did not alter this conclusion. Court noticed that recommendation itself acknowledged that Rule 96(10) was leading to unnecessary complications without serving any intended benefit and further observed that Council’s recommendation was advisory. Significantly, rule-making authority had neither incorporated a saving clause nor provided a sunset mechanism preserving pending proceedings. Supreme Court therefore concluded that intention behind omission was to bring unnecessary complications to an end once and for all and could not be construed as preserving those complications for pending matters. Finding no reason to interfere with High Court judgments, Revenue appeals were dismissed. Assessees’ SLPs challenging vires of Rule 96(10) were dismissed as infructuous since constitutional challenge no longer required adjudication. Recognising pendency of similar matters before different High Courts, Supreme Court directed Registry to circulate its order to all High Courts so that Rule 96(10) cases could be taken up expeditiously and quietus brought to litigation. Decision thus converts what had emerged as a persuasive and increasingly consistent High Court view into an authoritative declaration by Supreme Court and substantially closes controversy concerning application of omitted Rule 96(10) to pending proceedings.

Why a retrospective revival would be undesirable?

There is also a broader policy issue which deserves attention. Once the Government has consciously removed a provision after concluding that the restriction is no longer required, a subsequent retrospective amendment designed solely to revive concluded or pending disputes would create another cycle of litigation. Such legislation would inevitably invite challenges concerning vested rights, finality, validation of proceedings, reasonableness and the permissible limits of retrospective delegated or substantive legislation. Instead of ending the controversy, it could shift litigation from interpretation of Rule 96(10) to constitutional and statutory validity of the retrospective measure. More fundamentally, fiscal certainty is itself an important component of a stable tax system. Exporters structure pricing, working capital and international contracts on the basis that exports are zero-rated. Blocking substantial refund amounts for years imposes a real financing cost upon businesses. Where the Government has already decided that the restriction serves no continuing purpose, administrative resources would be better deployed in combating fraudulent exports and fictitious refund claims rather than continuing technical disputes involving genuine exports.

Omission should bring closure, not another round of litigation

The Rule 96(10) experience offers a broader lesson for GST policy. Frequent amendments, retrospective corrections and prolonged disputes concerning procedural restrictions undermine the certainty that a modern value-added tax requires. There has already been extensive litigation across the country. Multiple High Courts have devoted substantial judicial time to determining the consequences of a provision which the Government itself ultimately chose to remove. Exporters have similarly spent considerable resources defending refunds relating to genuine zero-rated supplies. There must come a point at which tax litigation is allowed to end. If a provision has been found administratively unnecessary, has been omitted from the Rules, contains no express saving clause for pending proceedings and the High Courts have consistently interpreted the omission in favour of closure of unfinished disputes, the sound policy response is to accept that position rather than reopen the controversy retrospectively.

Conclusion

Omission of Rule 96(10) by Notification No. 20/2024-Central Tax represents more than an amendment to refund procedure. It marks abandonment of a restriction that had generated disproportionate complexity and litigation in export sector. High Courts had drawn an important distinction between giving omission retrospective effect and applying a prospective omission to proceedings which remained pending when rule ceased to exist. This position has now received authoritative approval from Supreme Court in Goodluck India Limited & Anr. v. Union of India & Ors., 2026 INSC 821, decided on 6-8-2026. It held that Constitution Bench principle in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 : 2000 (119) E.L.T. 257 (S.C.) squarely applies and, in absence of any saving or sunset clause, omitted Rule 96(10) cannot continue to govern pending proceedings. Court also rejected Revenue’s reliance on GST Council recommendation for prospective omission, observing that such recommendation was advisory and that omission was intended to bring unnecessary complications to an end once and for all. Revenue appeals were accordingly dismissed and Supreme Court directed that its order be circulated to all High Courts so that pending Rule 96(10) litigation could be brought to an expeditious quietus. Decision therefore substantially settles controversy in favour of exporters whose proceedings had not attained finality when Rule 96(10) was omitted. What began as a prolonged dispute over an unnecessarily restrictive refund provision has thus reached its logical conclusion. Genuine exporters should no longer remain embroiled in litigation over a restriction which Government itself abandoned and Supreme Court has now held incapable of surviving in pending proceedings. Omission of Rule 96(10) has finally been allowed to achieve what it was intended to achieve—simplification, certainty and closure.