IGST Refund Claims Cannot Be Rejected Under Omitted Law: Bombay High Court

The Bombay High Court has held that refund claims cannot be thrown out on the basis of a statutory rule that no longer exists and must be looked at afresh once such a rule is omitted (deleted) without any saving clause.

The court set aside orders rejecting Integrated Goods and Services Tax refunds claimed by Kelvion India Private Limited and sent the matter back to the tax department for a fresh decision.

A Division Bench of Justice M S Sonak and Justice Advait M Sethna noted that the authorities had rejected the company's refund claims by relying on Rule 96(10) of the CGST Rules, a provision that restricted IGST refunds for exporters who had imported inputs duty-free under advance authorisation.

However, the bench pointed out that the rule itself has since been removed from the rules without any saving clause.

Referring to its earlier ruling in Hikal Ltd. v. Union of India & Ors. (2025), the bench observed, "Recently, in Hikal Ltd. (supra), this Court has held that the omission of Rule 96(10) was without making any provisions to save the pending proceedings. The adjudicating or appellate authority did not have the benefit of this decision, even though it would have some impact on the issues raised,” 

Kelvion India manufactures and exports heat exchangers and related products. It had imported raw materials duty-free under the Advance Authorisation scheme and later exported finished goods after paying IGST. Between June and December 2019, it received IGST refunds as permitted under the law.

The trouble began after the Directorate of Revenue Intelligence questioned the refunds, alleging a breach of Rule 96(10) of the CGST Rules, which at the time restricted IGST refunds in certain cases.

To avoid a prolonged fight, the company paid back Rs 2.82 crore along with interest of about Rs 38 lakh. It later claimed that this repayment was far more than what was legally payable and applied for a refund of the excess amount.

The tax department rejected the refund claim, and the appellate authority upheld that decision, relying on Rule 96(10). During the hearing before the High Court, the company pointed out that the rule itself had since been deleted without any clause protecting pending cases, a point accepted by the Court in its recent ruling in Hikal Ltd.

The Revenue, on the other hand, argued that there was no error in the earlier orders and said the company should pursue its remedy before the GST Appellate Tribunal.

The bench rejected that objection, noting that the tribunal is not operational.

“As of now, the GST Tribunal is not operational, and therefore, at least in the peculiar facts of this case and the order that we proposed to make, no useful purpose would be served by relegating the Petitioner to avail the alternate remedy” the Court said.

It added that the authorities would now have to re-examine everything, including the impact of the deletion of Rule 96(10), the question of whether Rule 86(4B) can apply retrospectively, and whether multiple refund claims are barred, without being influenced by the earlier rejection orders.

Without expressing any view on whether the refunds are actually payable, the court quashed the impugned orders and directed the adjudicating authority to decide the refund applications and the show cause notice afresh within six months. The writ petitions were allowed with no order as to costs. 

Case Title: Kelvion India Pvt. Ltd. vs The Union of India & Ors.

Citation: 2026 LLBiz HC(BOM) 23

Case Number:  WRIT PETITION NO. 14854 OF 2023

For Petitioner: Advocate  Rahul Thakar a/w Yash Dethe instructed by C. B. Thakar

For Respondents: Advocates Karan Adik instructed by Megha Bajoria