Rule 96(10) Held Ultra Vires for Denying IGST Refund on Export to AA Users

Case: M/s Addwrap Packaging Pvt. Ltd. & Ors. v. Union of India & Ors.
Court: Gujarat High Court, Ahmedabad
Petition Number: R/SPECIAL CIVIL APPLICATION NO. 22519 of 2019 (Clubbed with several petitions)
Relevant Sections: Rule 96(10) of CGST Rules, Section 16 of IGST Act, Section 54 of CGST Act
Category: Refund under GST for Exporters (Zero-rated supply)
Date of Judgment: 13/06/2025 (Modified by Order dated 27/06/2025)

Facts of the Case [Para 4-26]

1. Petitioners are exporters who paid IGST on goods exported from India and sought refund under Section 16(3)(b) of the IGST Act.
2. Some petitioners procured inputs under Advance Authorisation (AA) scheme without paying customs duty and procured remaining inputs/capital goods from domestic market with applicable GST.
3. Respondents denied refund of IGST citing violation of Rule 96(10) as petitioners had availed benefit of exemption notifications.
4. Refunds already granted were sought to be recovered through SCNs and OIOs.

Question(s) in Consideration [Para 2, 26]

1. Whether Rule 96(10) of the CGST Rules is ultra vires Section 16 of the IGST Act and Section 54 of the CGST Act?
2. Whether denial of refund based on Rule 96(10) violates Articles 14 and 19(1)(g) of the Constitution?

Observation of the Court [Para 27-74]

1. Rule 96(10) disqualifies exporters from claiming IGST refund if they or their suppliers availed specified exemptions.
2. The Court held that such restrictions override the statutory right conferred under Section 16(3)(b) IGST Act.
3. The Rule disproportionately restricts refund entitlement even where only a small portion of inputs was procured duty-free.
4. The explanation to Rule 96(10) added via Notification No. 16/2020-Central Tax (retrospective) created confusion.
5. The amendments after 01.10.2023 introduced power to restrict refunds to notified classes of goods/persons, which was not available earlier.
6. Rule 96(10), as framed, creates a “class within class” among exporters and lacks proportionality and legal backing.

Judgment of the Court [Para 75]

1. Rule 96(10) declared ultra vires to Section 16(3)(b) of the IGST Act and Section 54 of the CGST Act, insofar as it restricts refund where the petitioner availed Advance Authorisation or other notified exemptions.
2. Show cause notices and orders seeking recovery of refund solely on this ground are quashed.
3. Refund entitlement shall be considered under the Act without application of Rule 96(10) in such cases.

Between Fine Lines

Exporters who paid IGST on export and used AA licences cannot be denied refund merely due to exemption on some inputs. Rule 96(10) was struck down for being disproportionate and unconstitutional. The Court upheld the right of refund under Section 16(3)(b) IGST Act, restoring clarity and relief for genuine exporters. Refund cannot be denied solely because part of raw material was imported duty-free.

Summary of Referred Cases

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