Gujarat High Court Holds That Proceedings Based On Omitted Rule 89(4B) Cannot Survive In The Absence Of A Saving Clause

BRIEF FACTS OF THE CASE

• The Petitioner had challenged the proceedings initiated by the Department for denial of refund claims by invoking Rule 89(4B) of the CGST Rules, 2017. Rule 89(4B), along with Rule 96(10), was omitted by Notification No. 20/2024-Central Tax dated 08 October 2024, without any saving clause preserving pending proceedings. 
• Despite such omission, the Department proceeded further and passed an Order-in-Original against the petitioner. The petitioner, therefore, approached the Hon’ble Gujarat High Court seeking quashing of the show cause notice, Order-in-Original and consequential proceedings on the ground that the provision forming the basis of the proceedings had ceased to exist in law.

KEY OBSERVATIONS OF THE HON’BLE HIGH COURT

• The Court reaffirmed the settled principle of statutory interpretation that where a provision is omitted without a saving clause, it is treated as obliterated from the statute, as if it never existed, except for matters that are already "past and closed". 
• Inview of this principle, the Court held that the issue was no longer res integra, being squarely covered by its own earlier decisions and the BombayHigh Court ruling in Hikal Limited & Ors. [WP No.78of2025]. 
• TheCourt relied on its decision in JJ Plastalloy Pvt. Ltd. [R/SCA No. 3081 of 2025, dated 20 November 2025] and, applying the said principle to the facts of the present case, held that the proceedings initiated against the petitioner under the omitted Rule 89(4B)could not besustained.
• Consequently, the impugned Order-in-Original dated 29 April 2025 denying the refund was quashed and set aside.
• The ruling is a significant development for taxpayers whose refund claims have been denied or disputed on the basis of the erstwhile Rule 894B)or Rule 96(10) of the CGST Rules.
• It reaffirms that once a restrictive provision is omitted without a saving clause, the Department cannot continue to rely upon it for sustaining pending proceedings, and that a notice or order issued prior to the omission does not, by itself, render the matter "past and closed" if it has not attained finality. 
• While the present ruling squarely concerns Rule 89(4B), it is relevant to note that the Gujarat High Court's foundational reasoning in Messrs Addwrap Packaging Pvt. Ltd. & Anr. vs UOI [SCA No. 22519 of 2019, dated 13June2025]wasrendered inthe context of Rule96(10).Its extension to Rule 89(4B) flows from the combined reading in JJ Plastalloy with the Bombay High Court ruling in Hikal Limited, which considered both Rules together. 
• Thedecisionreinforces a consistent judicial trend, creating a persuasive line of precedents in favour of taxpayers. Accordingly, taxpayers having pending show cause notices, adjudication proceedings, appeals, writ petitions or refund claims rejected solely by invoking Rule 89(4B) or Rule 96(10) may consider relying upon these rulings to seek closure of proceedings, restoration of refund claims, or quashing of adverse orders, as the casemay be. 
• Asapractical next step, taxpayers should review all pending refund matters, whether before the Adjudicating Authority or the Appellate Authority, where denial of refund or recovery of a granted refund has been proposed on the basis of the omitted Rules. Applying the principle of judicial discipline and binding precedent, the benefit of these rulings may be pressed before the authorities for claiming refund or seeking to quash the demand.