The Bombay High Court has upheld the contention of the assessee that in absence of any saving clause in the omission of Rules 89(4B) and 96(10) of the Central Goods and Service Tax Rules, 2017, all pending proceedings, in respect of non-compliance with the conditions prescribed in the said Rules, would stand lapsed.
The High Court in the case of Hikal Limited and Ors. v. Union of India and Ors. observed the following for this purpose.
- Rules 89(4B) and 96(10) are not purely procedural but have impact on substantive rights of the parties, therefore, their repeal would essentially erase these Rules from existence as if they had never been enacted or passed. It was held that hence the Rules should be regarded as provisions that never existed, except in relation to ‘transactions past and closed’.
- Department never contended that the SCNs or the orders challenged in the Petitions were covered by the expression ‘transactions past and closed’.
- Show cause notices could not have proceeded any further post the repeal or omission of the impugned Rules i.e. beyond 8 October 2024. Even challenge to orders made by adjudicating authorities before 8 October 2024 was pending either before the Appellate Authorities or this Court.
- Section 6 of the General Clauses Act, 1897, is not applicable and does not save the pending proceedings. Notification dated 8 October 2024 by which the said Rules stood omitted or repealed is neither the General Clauses Act nor any Central Act as defined under Section 3(7) of the General Clauses Act, and is also not ‘regulation’ as defined under Section 3(50) ibid. Also, ‘Rules’ cannot be elevated to the status of a Central Act merely because they may have been enacted by exercising the powers under the Central Act.
- Section 174(3) cannot be regarded as a savings clause to protect the pending proceedings under the impugned Rules.
- Clause 1(2) of the CGST (Second Amendment) Rules, 2024 only states that the Rules [omissions] would come into effect from 8 October 2024, and does not prevent the lapsing of inconclusive proceedings or even orders that have not attained finality.
- Department’s argument based on Section 166 of the CGST Act, regarding laying of the notification before Parliament, was also rejected.
- Not including a savings clause in the Notification dated 8 October 2024 was not an accident but a conscious choice, made to benefit export, import, and trade.
Number of petitioners were here represented by Mr. V. Sridharan, Senior Advocate, Bombay High Court and Co-founder Lakshmikumaran & Sridharan Attorneys, along with Team LKS.