Hikal Limited Vs Union of India (Bombay High Court)

Bombay High Court rules on Hikal Limited petitions, holding that omission of CGST Rules 89(4B) & 96(10) without savings clauses lapses pending proceedings. Court clarifies Section 6 of General Clauses Act and Section 174(3) of CGST Act do not protect ongoing cases.The Bombay High Court in Hikal Limited vs Union of India addressed petitions challenging the validity and effect of CGST Rules 89(4B) and 96(10), which were omitted through the Central Goods and Services Tax (Second Amendment) Rules, 2024. The Court examined multiple issues, including constitutional validity, statutory interpretation of the General Clauses Act, and the implications for pending proceedings. First Issue – Constitutional Validity of the Impugned Rules:
The Bombay High Court in Hikal Limited vs Union of India addressed petitions challenging the constitutional validity of CGST Rules 89(4B) and 96(10). While acknowledging the arguments that these rules were ultra vires the CGST Act and unconstitutional, the Court refrained from deciding the matter. Citing established principles, the Court emphasized that constitutional validity should only be examined if necessary to provide effective relief to the petitioner. Since the petitions could succeed on other grounds—specifically, the omission of the impugned rules without savings clauses—the Court found it unnecessary to rule on their constitutionality. However, the Court noted prior judgments, including the Kerala High Court striking down Rule 96(10), which could have binding effects across India under Article 226, though this was not determinative in the present case.Second Issue – Legal Effect of Omission or Repeal Without Savings Clauses:
The Court examined the effect of the Central Government’s omission of Rules 89(4B) and 96(10) through the 2024 Amendment Rules. The petitioners argued that the repeal, without any savings clause, would abrogate pending proceedings, relying on common law principles that a repeal obliterates the law except for past and closed transactions. The respondents contended that pending proceedings were protected. The Court, referencing authoritative sources including Justice G.P. Singh, Halsbury’s Laws of England, and the Supreme Court in Gammon India Ltd., held that the repealed rules affected substantive rights of importers and exporters. Consequently, the omission without savings clauses effectively nullified pending proceedings under these rules, except for transactions that were already past and closed.Here’s a concise summary of the third and fourth issues in one paragraph each:Third Issue – Transactions Past and Closed:
The Court examined whether pending proceedings or orders under the repealed Rules 89(4B) and 96(10) could be protected as “transactions past and closed.” It was noted that none of the show cause notices or challenged orders qualified as finalized transactions. Consequently, notices that had not culminated in orders, as well as orders challenged on appeal or before other authorities, were vulnerable post-omission of the Rules on 08 October 2024. The Gujarat High Court in Add Wrap Packaging Pvt Ltd similarly held that pending proceedings could not continue after repeal, and petitioners were entitled to maintain refund claims under IGST paid on exports. Historical authorities, including Keshavan Menon vs State of Bombay, confirmed that a repeal or omission nullifies pending actions unless they relate to finalized transactions.Fourth Issue – Applicability of Section 6 of the General Clauses Act:
The Court analyzed whether Section 6 of the General Clauses Act, 1897 could save pending proceedings under the omitted Rules. Section 6 applies only to the repeal of a Central Act, the General Clauses Act itself, or a “regulation” as defined therein, and not to subordinate legislation or Rules. Since the 08 October 2024 notification merely omitted CGST Rules 89(4B) and 96(10), Section 6 did not apply. Reliance on Supreme Court precedents such as Rayala Corporation Pvt Ltd and Kolhapur Cane Sugar Works confirmed that repealed Rules without a savings clause cannot preserve ongoing proceedings. Consequently, show cause notices and pending orders under the repealed Rules were not saved by Section 6 and lapsed automatically.Fifth Issue – Whether the 2024 Rules Can Be Treated as a “Central Act” for Section 6 of the General Clauses Act:
The Court rejected the argument that the Central Goods and Services Tax (Second Amendment) Rules, 2024—made under Section 164 of the CGST Act—could be considered a “Central Act” for the purposes of Section 6 of the General Clauses Act. A “Central Act” is primary legislation enacted by Parliament, while Rules are subordinate legislation framed under the enabling provisions of a Central Act. Constitution Bench precedents, including Kolhapur Cane Sugar Works Ltd, confirmed that pending proceedings under repealed or omitted Rules lapse unless a savings clause exists in the parent statute or the newly enacted Rule. Contentions based solely on the empowering provision in the CGST Act (Section 164) were therefore rejected. Earlier High Court decisions accepting such contentions were expressly overruled.Sixth Issue – Reliance on Section 174(3) of the CGST Act:
Section 174(3) merely references Section 6 of the General Clauses Act as a cautionary measure to protect pending proceedings under repealed enactments specifically mentioned in Section 174(1). The Court held that Section 174(3) cannot be treated as a standalone savings provision for Rules omitted via the 08 October 2024 notification, nor can it amend or enlarge the scope of Section 6. Accordingly, pending proceedings under Rules 89(4B) and 96(10) are not saved by Section 174(3).Seventh Issue – Clause 1(2) of the 08 October 2024 Notification:
The Respondents argued that Clause 1(2) of the notification grants prospective effect to the omission of the Rules, relying also on GST Council minutes. The Court clarified that Clause 1(2) only fixes the effective date of the Rules’ omission and does not operate as a savings clause. Pending proceedings or proceedings where orders were not final cannot be preserved merely by such a clause. Only transactions “past and closed” enjoy protection under common law principles, not due to Clause 1(2).Eighth Issue – Reliance on Section 166 of the CGST Act:
Section 166 provides for laying Rules, Regulations, and Notifications before Parliament, allowing modification or annulment by resolution. The Court held this laying requirement to be directory, not mandatory, based on Supreme Court precedents (Atlas Cycle Industries Ltd, Veneet Agrawal vs UOI). Even if the notification was laid before Parliament, it does not elevate the Rules to the status of a Central Act for Section 6 purposes, nor does it save pending proceedings under the omitted Rules.Miscellaneous Observations (Paragraphs 111–121)Reliefs Granted (Paragraphs 122–126)Key Takeaway: The Court decisively held that omission of CGST Rules 89(4B) and 96(10) without any savings clause or applicability of Section 6 of the General Clauses Act results in the lapsing of pending proceedings under those Rules. Only transactions already “past and closed” remain unaffected, and the relevant authorities must reconsider any impacted applications accordingly.Conclusion: The Bombay High Court reaffirmed the principle that subordinate rules omitted without savings clauses cannot preserve ongoing proceedings, and only finalized transactions retain legal protection. The judgment provides clarity on the limits of Section 6 of the General Clauses Act and Section 174(3) of the CGST Act in protecting pending proceedings, ensuring consistency with prior Supreme Court and High Court rulings.