Pending Rule 96(10) GST Notices to Exporters Cannot Continue

Summary: Rule 96(10) of the CGST Rules restricted exporters who had availed specified tax benefits on inputs from claiming IGST refunds on exports. After its omission by Notification No. 20/2024-Central Tax with effect from 08.10.2024, without a saving clause, the question arose whether pending show cause notices, demand orders and appeals based on the omitted provision could continue. The Supreme Court in M/s Goodluck India Ltd. & Anr. v. Union of India & Ors., decided on 06.08.2026, has settled the issue by holding that proceedings which were not past and closed on the date of omission cannot survive. Relying on the principles laid down in Rayala Corporation, Kolhapur Canesugar Works and Fibre Boards, the Court held that Section 6 of the General Clauses Act does not preserve proceedings arising from an omitted rule in the absence of a saving clause. The Bombay High Court in Hikal identified pending show cause notices, orders passed after the omission and orders that had not attained finality because of pending appeals or challenges as matters that are not past and closed. Various High Courts, including Gujarat, Delhi, Andhra Pradesh, Calcutta and Punjab and Haryana, have applied the same principle. The article also examines subsequent rulings concerning DRC-07 demands, recovered amounts and interest, including Global Calcium, B.V.L. Granites, Leben Laboratories and KSE Electricals. For exporters facing Rule 96(10) proceedings, the judgment provides a basis to seek dropping of pending proceedings and, where applicable, refund of amounts recovered or deposited.

If you are an exporter who has received a GST notice under Section 73 or Section 74 for recovery of an IGST refund due to alleged violation of Rule 96(10), the status of that proceeding on 08.10.2024 may decide its fate.

An exporter imports raw material duty-free under Advance Authorisation, exports the finished goods on payment of IGST, and receives the IGST refund. Years later, a show cause notice under Section 74 (or Section 73) arrives, alleging that the refund was erroneous because Rule 96(10) of the CGST Rules, 2017 was violated, and demanding the entire refund back with interest and penalty. A large number of exporters, EOUs, EPCG holders and merchant exporters have received such notices.

If that notice, the order passed on it, or the appeal against that order was still pending on 08.10.2024, it can no longer be continued. The Supreme Court has now settled this in M/s Goodluck India Ltd. & Anr. v. Union of India & Ors., SLP (C) No. 24550 of 2025 and connected matters, decided on 06.08.2026, [2026] 189 taxmann.com 330 (SC); 2026 INSC 821. This article explains what Rule 96(10) did, why its omission ends pending proceedings, what ‘past and closed’ means, how each High Court has ruled, and what a taxpayer facing a Rule 96(10) demand should do now.

Rule 96(10) CGST Rules: IGST Refund Bar for Advance Authorisation, EPCG, EOU and Deemed Export Cases

An exporter can export in two ways. It can export under a Letter of Undertaking (LUT) without paying IGST and claim refund of unutilised input tax credit, or it can pay IGST on the export and claim refund of that IGST under Rule 96.

Rule 96(10) closed the second route for exporters who had received tax benefits on their inputs. It applied where the exporter had received supplies under Notification No. 48/2017-Central Tax (deemed exports) or Notification Nos. 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) (supplies to merchant exporters), or had availed Notification No. 78/2017-Customs or 79/2017-Customs (imports by EOUs and under Advance Authorisation or EPCG). Capital goods received under the EPCG scheme were excluded. An Explanation clarified that the bar did not apply where the exporter had paid IGST and compensation cess on imported inputs and claimed exemption only from basic customs duty.

On this basis, the Department treated IGST refunds already sanctioned to such exporters as erroneous refunds, and initiated recovery, usually through a show cause notice under Section 74 or Section 73, followed by a demand order and recovery in Form GST DRC-07.

Rule 96(10) Omitted by Notification No. 20/2024–Central Tax Without a Saving Clause

At its 54th meeting on 09.09.2024, the GST Council accepted the Law Committee’s view that Rule 96(10) was creating unnecessary complications without serving any intended benefit. It recommended omitting Rule 96(10), along with Rules 89(4A) and 89(4B), with prospective effect. Notification No. 20/2024–Central Tax dated 08.10.2024 omitted Rule 96(10) with effect from that date.

The notification did not contain a saving clause, that is, a provision stating that proceedings already started under the omitted rule would continue. The Department nonetheless argued that because the Council intended the omission to be prospective, all refunds relating to the period before 08.10.2024 remained governed by Rule 96(10). The absence of a saving clause is what defeated that argument.

Why Omission Without a Saving Clause Ends Pending Proceedings

When a Central Act is repealed, Section 6 of the General Clauses Act, 1897 keeps pending proceedings alive. But the Supreme Court held in Rayala Corporation (P) Ltd. v. Director of Enforcement, (1969) 2 SCC 412, and the Constitution Bench confirmed in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536, that Section 6 does not apply when a rule is omitted.

The consequence, as explained in Kolhapur Canesugar, is that when a provision is omitted unconditionally without a saving clause, all actions must stop where the omission finds them. If final relief has not been granted before the omission takes effect, it cannot be granted afterwards. Fibre Boards (P) Ltd. v. CIT, (2015) 10 SCC 333, adds that omission is a form of repeal and wipes the provision out, except for transactions that are past and closed.

In simple terms, a Rule 96(10) proceeding needs Rule 96(10) to exist. Once the rule is gone and nothing saves the proceeding, the proceeding has no legal basis on which to continue.

What Are ‘Transactions Past and Closed’ Under Rule 96(10)?

Since only past and closed matters survive the omission, this expression decides whether a particular case gets relief. The clearest explanation comes from the Bombay High Court in Hikal Ltd. v. Union of India, W\.P. No. 78 of 2025 and batch, decided on 11.09.2025, [2025] 178 taxmann.com 333 (Bom.). In paragraph 122, the Division Bench held that the following are not transactions past and closed, and therefore stand lapsed:

1. show cause notices that had not been decided;

2. orders passed after 08.10.2024 on such show cause notices; and

3. orders passed before 08.10.2024 that had not become final, because an appeal was pending before the appellate authority or a challenge was pending before the High Court.

The Delhi High Court in Vinayak International Housewares applied the same test to pending appeals, including one where the pre-deposit had already been paid. The Calcutta High Court in Techno Waxchem also held that pending notices, orders under challenge and ongoing appeals are not past and closed.

High Court Rulings Quashing Rule 96(10) Show Cause Notices and Demand Orders

Kerala High Court:

In Sance Laboratories Pvt. Ltd. v. Union of India, WP(C) No. 17447 of 2023 and connected matters, decided on 10.10.2024, [2024] 167 taxmann.com 760 (Ker.), the Court declared Rule 96(10) ultra vires Section 16 of the IGST Act and manifestly arbitrary, and quashed the proceedings against the petitioners. It allowed issues other than Rule 96(10) in the same notices and orders to be pursued separately.

Uttarakhand High Court:

In Sri Sai Vishwas Polymers v. Union of India, Writ Petition (MB) No. 103 of 2025, decided on 30.04.2025, the Court set aside an order passed after the omission, holding that Rule 96(10) could not be invoked once it had been omitted without a saving clause.

Gujarat High Court:

In Addwrap Packaging Pvt. Ltd. v. Union of India, R/Special Civil Application No. 22519 of 2019 and connected matters, decided on 13.06.2025, [2025] 175 taxmann.com 592 (Guj.), the Court considered three possible readings of the omission: retrospective, prospective, or prospective but applicable to pending proceedings. It adopted the third. It held that the omission is prospective, but applies to all proceedings where final adjudication had not taken place. It quashed the show cause notices and orders-in-original and held that the exporters could pursue their IGST refund claims, without deciding the validity of the rule.

Bombay High Court:

In Hikal, discussed above, the Court also held that neither Section 6 of the General Clauses Act nor Section 174(3) of the CGST Act saved the pending proceedings.

Delhi High Court:

In Vinayak International Housewares Pvt. Ltd. v. Union of India, W\.P.(C) Nos. 3154, 3165 and 10687 of 2023, decided on 20.11.2025, [2025] 181 taxmann.com 264 (Del.), the Court quashed Rule 96(10) proceedings at every stage, from summons to show cause notices and the orders passed on them.

Andhra Pradesh High Court:

In B.V.L. Granites v. Additional Commissioner of Central Tax, decided on 20.01.2026, [2026] 182 taxmann.com 830 (AP), the Court set aside the assessment orders and held that amounts recovered were liable to be refunded.

Calcutta High Court:

In Techno Waxchem Pvt. Ltd. v. Union of India, WPA No. 13772 of 2025, decided on 22.05.2026, [2026] 186 taxmann.com 1005 (Cal.), the Court quashed an order-in-original and the consequential DRC-07 demands arising from Advance Authorisation imports.

Goodluck India Supreme Court Judgment on Rule 96(10): What Was Decided

The Revenue appealed against Addwrap Packaging. Before a Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran, it relied on the minutes of the 54th GST Council meeting and argued that the omission was meant to be prospective, so proceedings started before 08.10.2024 should survive. The exporters argued that a rule omitted without a saving clause cannot support any pending proceeding.

The Supreme Court accepted the exporters’ case for four reasons:

1. The GST Council’s recommendation for prospective omission is advisory and does not bind the rule-making authority. The intention must be read from the notification itself, which contains no saving or sunset clause.

2. Rule 96(10) was omitted because it caused unnecessary complications. An omission meant to end those complications cannot be read as keeping them alive in pending cases.

3. The principle in Kolhapur Canesugar applies squarely. Section 6 of the General Clauses Act does not apply to rules, and without a saving clause, pending proceedings come to an end when the omission takes effect.

4. The Gujarat High Court’s judgment was well reasoned and required no interference.

The Revenue’s appeals were dismissed. The exporters’ petitions challenging the validity of Rule 96(10) were dismissed as infructuous, meaning they no longer needed to be decided. The Supreme Court therefore did not rule on whether Rule 96(10) was valid, and the Kerala High Court’s decision in Sance Laboratories on that question has been neither approved nor overturned.

Recognising that High Courts had passed conflicting orders, the Court directed that a copy of its judgment be sent to every High Court, and that pending Rule 96(10) matters be placed before the appropriate Benches expeditiously to bring the litigation to an end.

As a reasoned judgment declaring the law, Goodluck India binds all courts under Article 141 of the Constitution, and every authority, including State GST officers, is required to act in accordance with it under Article 144.

CBIC Office Memorandum Dated 24.08.2026 on Rule 96(10)

It is interesting to note that In KSE Electricals Pvt. Ltd. & Anr. v. Additional Commissioner, Kolkata South CGST & CX Commissionerate & Ors., W.P.A. No. 6429 of 2025, a CBIC Office Memorandum dated 24.08.2026 was placed on record wherein CBIC has accepted Goodluck India and instructs field formations not to initiate or pursue proceedings based on the omitted rule. The Court took a copy on record and took judicial notice of it. (The text of the memorandum was not publicly available at the time of writing.)

Punjab and Haryana High Court on Rule 96(10): Pending Proceedings Cannot Survive

The Punjab and Haryana High Court has applied the same principle in Indogulf Cropsciences Ltd. v. Commissioner, Central GST Commissionerate, Rohtak & Ors., CWP No. 8219 of 2026, decided on 14.08.2026. Recording that the Special Leave Petition against the Bombay High Court’s judgment in Hikal stands dismissed, the High Court followed Hikal and set aside the proceedings founded on Rule 96(10).

For exporters this means the jurisdictional High Court now applies the Goodluck test: a Rule 96(10) show cause notice, order or appeal that was not past and closed on 08.10.2024 cannot be sustained.

Madras, Bombay and Calcutta High Courts After Goodluck India: DRC-07 Demands and Refund of Interest

Madras High Court:

In Global Calcium Pvt. Ltd. v. Union of India, W\.P. No. 33675 of 2026 and batch, by a common order dated 31.08.2026, the Court disposed of petitions challenging show cause notices, orders-in-original and DRC-07 demands. It directed that pending proceedings and refund claims, including claims for amounts already paid, be processed in line with Addwrap Packaging and Goodluck India.

Bombay High Court:

In Leben Laboratories Pvt. Ltd. v. Union of India & Ors., W\.P. No. 15373 of 2025, decided on 01.09.2026, the exporter had relied on the retrospective Explanation to Rule 96(10) and repaid the additional duties of customs on its Advance Authorisation imports in March and April 2022, together with about ₹43 lakh as interest. The Court held that there was no legal obligation to make that repayment, so no interest could be charged on it, and directed refund of the interest. The Court also relied on a separate ground: during the relevant period, the Customs Tariff Act, 1975 did not authorise interest on additional duties of customs.

Calcutta High Court:

In KSE Electricals, decided on 03.09.2026, the Court quashed a Section 74 show cause notice dated 25.07.2024 for July 2017 to March 2022, and the orders dated 04.02.2025 passed on it, because they were founded solely on the omitted rule. The Department’s argument that it had acted under the law in force at the time did not succeed.

Section 73 or 74 Notice or DRC-07 Demand Under Rule 96(10): What to Do Now

1. Show cause notice or adjudication pending: File a reply placing Goodluck India on record and request that the proceedings be dropped as having lapsed.

2. Order passed after 08.10.2024, or appeal pending: The matter falls within the categories that Hikal held are not past and closed. In each ruling discussed above, the High Court entertained a writ petition and set aside the proceedings.

3. Amount recovered, reversed or deposited: Seek refund, relying on B.V.L. Granites and Global Calcium, and on Leben Laboratories where interest was paid.

4. Demand also raised on other grounds: Only the Rule 96(10) portion falls away. Other grounds in the same notice or order survive and must be contested on their own merits, as the Kerala High Court’s directions in Sance Laboratories show.

Department claims the matter is past and closed: Check the record for any pending appeal, writ or unexpired limitation period before accepting that position.

Frequently Asked Questions on Omission of Rule 96(10)

Q.1 Is Rule 96(10) of the CGST Rules still in force?

Ans. No. It was omitted with effect from 08.10.2024 by Notification No. 20/2024–Central Tax, without any saving clause.

Q.2 Can a Section 73 or 74 show cause notice issued before 08.10.2024 under Rule 96(10) still be decided?

Ans. Not if it was pending on that date. Under Goodluck India, proceedings founded on the omitted rule cannot continue, whichever section the notice was issued under. In KSE Electricals, a Section 74 notice dated 25.07.2024 and the orders passed on it in February 2025 were quashed on this basis.

Q.3 Is a Rule 96(10) demand under appeal on 08.10.2024 past and closed?

Ans. No. Hikal and Vinayak International Housewares hold that orders under appeal or under challenge had not become final and stand lapsed.

Q.4 Can IGST recovered under a Rule 96(10) demand be refunded?

Ans. High Courts have set aside such demands and directed refunds or the processing of refund claims, as in B.V.L. Granites and Global Calcium. The outcome in a particular case depends on its facts and on the matter not being past and closed.

Q.5 Did the Supreme Court declare Rule 96(10) unconstitutional?

Ans. No. The petitions challenging its validity were dismissed as infructuous. The Supreme Court decided only the effect of the omission on pending proceedings.

Conclusion

Rule 96(10) is gone, and with it every show cause notice, demand order and appeal founded on it that was still pending on 08.10.2024. Goodluck India has closed the debate on pending proceedings, and the High Courts, including the Punjab and Haryana High Court, are applying the same principle. For exporters still carrying a Rule 96(10) demand, the law is now on their side, and the next step is to put it before the authority. Goodluck!