The Supreme Court has clarified that when a subordinate legislation (a rule) is omitted without a saving clause, the omission operates to obliterate the rule from the statute book entirely, and the benefit of such omission inures to the assessee in all pending proceedings. Section 6 of the General Clauses Act does not apply to the omission of a rule. The Apex Court ruled that an advisory recommendation of the GST Council suggesting prospective application cannot substitute for a statutory saving clause. In the absence of any legal fiction or saving provision incorporated by the legislature, proceedings pending as on the date of omission of Rule 96(10) of the CGST Rules, 2017 must be considered without the restrictions imposed by that sub-rule.
A Two-Judge Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran noted that Rule 96(10) was omitted without any saving clause or sunset clause, and the GST Council’s recommendation in its 54th meeting held on 09th September 2024, that the omission be prospective, was only advisory in nature and did not bind the rule-making authority. The Court recorded the ASG’s fair concession that the GST Council’s recommendation is not mandatory. The recommendation itself recorded that Rule 96(10) was “leading to unnecessary complications without any intended benefit being served,” and the Law Committee had recommended its omission along with consequential amendments to Rules 86, 89, and related provisions.
The Court placed strong reliance on the Constitution Bench decision in Kolhapur Canesugar Works Ltd v. Union of India [(2000) 2 SCC 536], where the question was whether a refund demanded under Rule 10A of the Central Excise Rules, 1944, which stood omitted before the final order was passed, could still be enforced. The Constitution Bench held that the effect of repealing or deleting a provision is to obliterate it from the statute book as completely as if it had never existed. It was further held that Section 6 of the General Clauses Act, which deals with the effect of repeal of a Central Act or regulation, does not apply to the omission of a “rule.” The Constitution Bench observed that only if there was a provision for continuance of proceedings already initiated, or a legal fiction incorporated into the statute to that effect, could proceedings under an omitted rule be continued.
The Court applied the Kolhapur Canesugar principle squarely to the present case, holding that since the legislature did not bring in any saving clause when Rule 96(10) was omitted, the intention was to bring an end to the unnecessary complications once and for all, not to keep them alive in pending proceedings. The recommendation for prospective application being merely advisory, it could not override the legal effect of omission without a saving clause.
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Briefly, the core issue was whether the omission of Rule 96(10), which had imposed restrictions on refund of integrated tax paid on goods and services exported out of India, would inure to the benefit of assessees in pending proceedings. The Union of India and the Department challenged the High Court’s judgment holding that the omission applied to all pending proceedings, while two SLPs filed by the assessees challenged the very vires and validity of Rule 96(10), which the High Court had refused to consider.
