Recovery Stayed on Refund Restriction under Rule 96(10) – Interim Relief

Case Title: M/s Saru Silver Alloys Pvt Ltd v. Union of India & Ors.
Court: High Court of Judicature at Allahabad
Petition No.: Writ Tax No. 1534 of 2024
Category of Dispute: Refund – Validity of Rule 96(10), CGST Rules
Date of Order: 06.12.2024
Relevant Provisions: Section 16, 54 of the CGST Act, Rule 96(10) & Rule 86(4B)(b) of the CGST Rules

Facts of the Case

• The petitioner challenged the order-in-original dated 16.04.2024 (rectified on 12.06.2024) which restricted refund of IGST on exports by applying Rule 96(10) of the CGST Rules (Para 1, 5).

• Counsel argued that Kerala High Court in Sance Laboratories Pvt Ltd v. UOI (2024 SCC OnLine Ker 6334) struck down Rule 96(10) as unconstitutional (Para 1).

• It was further argued that reliance on Cosmo Films Ltd v. UOI (2020 (43) GSTL 577 – Gujarat HC) was misplaced as that judgment was later reviewed on 19.09.2024 (Para 1).

• Additionally, the Central Government by Notification dated 08.10.2024 amended Rule 86(4B)(b) and omitted reference to contravention of Rule 96(10), showing policy reconsideration (Para 2).

Question in Consideration

• Whether refund restrictions imposed under Rule 96(10) of CGST Rules can be sustained when the provision itself has been struck down and subsequently omitted by the Government? (Para 1–2).

Observations of the Court

• The Court noted the submissions regarding the Kerala HC judgment striking down Rule 96(10) and the prospective amendment made by the Government (Para 1–2).

• Considering the challenge raised and pending adjudication, the Court issued notice and called for counter-affidavit within six weeks (Para 3–4).

• The Court granted interim protection by staying recovery under the impugned orders till further orders (Para 5).

Judgement of the Court

• Notice issued. Counter and rejoinder affidavits directed to be filed in stipulated time.

• Interim order: Recovery pursuant to the order-in-original dated 16.04.2024 (as rectified on 12.06.2024) stayed until further orders (Para 5).

Between Fine Lines (Simplified Summary in 5 lines)

1. Export refund was denied citing Rule 96(10) of CGST Rules.

2. Kerala HC has already struck down this rule as unconstitutional.

3. Gujarat HC’s earlier view upholding it was reviewed.

4. Govt. itself deleted the reference to Rule 96(10) in Oct 2024.

5. Allahabad HC has now stayed recovery, giving interim relief.

Summary of Referred Cases

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