Commissioner/Additional Commissioner of Central Tax & Ors. Vs India Agro Exports Private Limited (Karnataka High Court)
Summary: The Karnataka High Court, in Commissioner/Additional Commissioner of Central Tax & Ors. Vs India Agro Exports Private Limited, dismissed the Revenue’s writ appeal challenging an order directing the processing of IGST refunds withheld under Rule 96(10) of the Central Goods and Services Tax Rules, 2017. The Division Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha relied on the Supreme Court’s decision in Goodluck India Limited and Another vs. Union of India and others, which held that proceedings under the omitted provision could not continue in the absence of a saving or sunset clause. The judgment was delivered on 28 October 2026.
The dispute arose when India Agro Exports Private Limited approached the High Court through W.P. No. 20792/2021, seeking directions for sanctioning its refund in accordance with Rule 96(3) of the CGST Rules. The company also challenged letters dated 8 February 2021 and 5 March 2021 through which the authorities had withheld its refund. The withholding was based on Rule 96(10), which imposed restrictions concerning refunds of integrated tax paid on exported goods in specified circumstances. The learned Single Judge, by an order dated 9 December 2025, directed the authorities to process the refund, following the earlier Karnataka High Court decision in M/s. Hikal Limited v. Union of India and Others.
Before the Division Bench, the controversy concerned the effect of the omission of Rule 96(10) through a notification dated 8 October 2024. The respondent maintained that the omission operated retrospectively, whereas the Revenue argued that it was prospective. The Revenue challenged the Single Judge’s decision on that basis. During the appeal, however, Revenue’s counsel placed before the Court the Supreme Court’s subsequent decision in Goodluck India Limited and Another vs. Union of India and others, reported as 2026 SCC OnLine SC 1523, which had authoritatively settled the issue.
The Supreme Court, following the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536, had held that proceedings under an omitted rule could not be continued when the rule-making authority had not incorporated a saving provision. It observed that Rule 96(10) had been omitted because it created unnecessary complications without serving any intended benefit. Although the recommendation underlying the omission contemplated prospective operation, the Supreme Court explained that such a recommendation was advisory and did not bind the rule-making authority. The absence of a saving or sunset clause was therefore decisive in determining the treatment of pending proceedings.
The High Court also considered a clarification issued by the Central Board of Indirect Taxes and Customs on 26 October 2026. The clarification stated that the omission of Rule 96(10) would operate retrospectively from 23 October 2017 and directed field formations to deal with pending proceedings in accordance with the Supreme Court judgment. It further clarified that the same treatment would apply, mutatis mutandis, to the omission of Rules 89(4A) and 89(4B). In view of the binding Supreme Court ruling and the departmental clarification, the Division Bench found no ground to interfere with the Single Judge’s order. Accordingly, the Revenue’s writ appeal was dismissed, and the pending interlocutory application was disposed of.
Cases Discussed
1. Kolhapur Canesugar Works Ltd. v. Union of India — (2000) 2 SCC 536 (Supreme Court).
2. M/s. Hikal Limited v. Union of India and Others — W.P. No. 15251/2020, decided on 09.12.2025 (Karnataka High Court). The learned Single Judge followed this decision while directing the processing of the respondent’s refund.
3. Goodluck India Limited and Another vs. Union of India and others — 2026 SCC OnLine SC 1523 (Supreme Court). The Supreme Court held that proceedings under omitted Rule 96(10) could not continue without a saving or sunset clause. The Karnataka High Court relied on this ruling in dismissing the Revenue’s appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. The Revenue has filed the present appeal impugning an order dated 09.12.2025 [impugned order] passed by the learned Single Judge in Writ Petition No.20792/2021 (T-RES). The respondent had filed the said petition inter alia praying that directions be issued to the proper officer to sanction the refund following the procedure under Rule 96(3) of the Central Goods and Services Tax Rules, 2017 [CGST Rules]. The respondent had also impugned the letters dated 08.02.2021 and 05.03.2021 whereby its refund had been withheld.
2. A plain reading of the said letters indicated that the refunds had been withheld on account of Rule 96(10) of the CGST Rules.
3. This Court is informed that Rule 96(10) of the CGST Rules was deleted by a notification dated 08.10.2024. However, one of the questions that arose in the said context was whether the deletion would be applicable retrospectively.
4. Whilst the respondent argued that the notification is retrospective, the Revenue contended that the deletion of Rule 96(10) of the CGST Rules is prospective.
5. The learned Single Judge following an earlier decision of this Court in M/s. Hikal Limited v. Union of India and Others1 passed in W.P No.15251/2020 directed that the refund due to the respondents be processed.
6. The learned counsel appearing for the Revenue handed over a recent decision of the Supreme Court in Goodluck India Limited and Another vs. Union of India and others2, whereby the said issue stands authoritatively settled. The Supreme Court following the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India3 held that the proceedings under an omitted rule could not be continued. The Supreme Court found that since there was no savings clause or a sunset clause in respect of Rule 96 (10) of the CGST Rules proceedings, the said rule could not be kept alive. Paragraph 7 of the said decision is set out below:
“7. The Constitution Bench decision applies squarely in the above case. We may also observe that even going by the recommendations as extracted hereinabove, sub-rule (10) of Rule 96 was omitted because it was ‘leading to unnecessary complications without any intended benefit being served’ (sic). As fairly submitted by the learned ASG the legislature has not brought in any saving clause or a sunset clause, when sub-rule (10) of Rule 96 was omitted. The recommendation that the omission should be prospective is also advisory in nature and does not bind the rule making authority. The intention to omit the rule without any saving clause was to bring to an end, the unnecessary complications once and for all and the intention cannot be to keep alive the unnecessary complications insofar as the pending proceedings are concerned.”
7. The Central Board of Indirect Tax and Customs has also issued a clarification dated 26.10.2026 inter alia stating as under:
“6. In view of this decision of the Hon’ble Supreme Court, it is hereby clarified that the said omission of rule 96(10) of the CGST Rules will be effective retrospectively from 23.10.2017. Accordingly, the field formations are advised to deal with pending proceedings concerning rule 96(10) in accordance with the said judgment. It may also be noted that such a treatment shall apply, mutatis mutandis, in respect of omission of rules 89 (4A) and 89 (4B) as well.”
8. In view of the above, we find no ground to interfere with the impugned order. The appeal is, accordingly, dismissed.
9. The pending interlocutory application also stands disposed of.
Notes:
1 Writ Petition 15251/2020 dated 09.12.2025
2 2026 SCC OnLine SC 1523
3 (2000) 2 SCC 536
