Saving Clauses in Tax Legislations: Continuity of Proceedings After Repeal

Introduction:

In recent times, the Central Government has frequently amended existing laws and, in many cases, replaced old enactments with new legislative frameworks. This trend is particularly evident in tax laws such as the Central Goods and Services Tax Act, 2017 and the Income-tax Act, 1961, along with continuous amendments to the corresponding rules and procedures. The legislative act of amending or replacing an existing law or statutory provision is commonly referred to as ‘repeal’.

Whenever a law or a statutory provision is repealed, a critical issue arises concerning the transition of pending proceedings initiated under the erstwhile law. Specifically, the question is whether, upon the introduction of a new law, proceedings such as assessments, adjudications, appeals, investigations or enforcement actions initiated under the repealed law would continue under the new regime or stand abated or obliterated.

It is in this context that the concept and importance of a “saving clause” assumes significance. A saving clause is a legal provision typically found in statutes, constitutional amendments, or legislative repeals, which upholds legal effects, rights, duties, liabilities, or proceedings under an old law even after that law has been repealed, amended, or replaced. The purpose of a saving clause is to prevent disruption or injustice that may arise from the sudden change or repeal of a law. The presence or absence of a saving clause often becomes determinative in assessing whether past transactions stand protected or whether pending proceedings are rendered non est, thereby positioning the saving clause as either a shield safeguarding accrued rights or a sword enabling continued enforcement.

It is also important to know the common law principles in case of ‘omission or repeal’ which provides that except as to transactions past and closed, an act or enactment which is repealed is to be treated thereafter as if it had never existed unless it is saved by a saving clause. When an act is repealed, then it is treated as revoked or abrogated and removed from what is popularly known as the statue book. The Common Law is the judge made law and do not have specific statutory backup but supported by the Principles of Statutory Interpretation.

Considering the importance of saving clause, the Indian Constitution also provides for the same through Article 277 and 305 of the Indian Constitution. Article 277 reserves rights of the States, municipalities, local areas, districts etc., to collect taxes, cesses, duties, fees etc., even when such rights fall under the Union List after the adoption of the Indian Constitution unless Parliament substitutes such provisions. Further, Article 305 protects the existing law in force prior to Indian Constitution (Fourth Amendment) Act, 1955 in order to safeguard the persons engaged in trade, business, industry, and service from adverse laws by the States.

Similarly, Section 174 of the Central Goods and Services Tax Act, 2017 provides for repeal and saving of pre-GST laws such as Finance Act, 1994, Central Excise Act, 1944 etc. The said provision has been challenged before various High Courts. Few of the important decisions are as follows

• Vianaar Homes Pvt. Ltd. Vs. Asstt. Commr. (Circle-12), CGST, Audit-II, Delhi [2020 (43) G.S.T.L. 479 (Del.)] - The Right to recover Service tax is still present even though the prior Act is repealed by the CGST Act, 2017. Investigations/Inquiry/Adjudication comes under the ambit of Section 174(2) of the CGST Act, 2017. Without such proceedings, it would amount to duty evasion. The same is decided in the case of M/s. Aargus Global Logistics Private Limited v. Union of India and Another’- 2020 (3) TMI 811 - Delhi High Court]
• Amrita International Institute of Hotel Management Vs. Principal Commissioner of CGST & C. Ex., Chennai [2023 (71) G.S.T.L. 246 (Mad.)] - Levy is same under both the Old and New Enactments even though the new provisions override old provisions.
• Dev Versha Publication Private Limited and others Vs Union of India and others [2023 (6) TMI 790 – Uttarakhand High Court] – Jurisdiction lies with the GST officers to issue SCN on service tax matters after 01-07-2017 i.e., even after the repeal of the Chapter V of the Finance Act, 1944 by Section 173 of the CGST Act, 2017 as saving clause under Section 174 provides for adjudication of the liability of Pre-GST taxes.
• Sheen Golden Jewels (India) Pvt. Ltd. Vs. State Tax Officer (IB)-1, Thiruvananthapuram [2023 (69) G.S.T.L. 242 (Ker.)], where notices issued under Clauses (i) to (iv) of Section 174(2) of the KSGST Act are within the jurisdiction of the Department.

However, the above referred decisions are relevant only with respect to saving of proceedings under pre-GST laws and the same is not applicable to amendments made in CGST Act, 2017.  The repeal or amendment or replacement can happen in Act, Rules or corresponding notifications. In this context, it is important to understand how the amended provisions or corresponding rules and notifications can be saved. It can be done in following ways

1. The statute can have a specific saving clause to save the amendments in act, rules or notifications
2. If there is no saving clause in statute, the same can be provided in the Finance Act in which the old statute is amended or can be provided in the Notification in which a particular Rule or a Notification is being amended.

An example for having saving clause can be understood from Notification No. 17/2017-Integrated Tax (Rate) dated 05-07-2017 wherein it revokes Notification No. 15/2017-Integrated Tax (Rate) and the said notification read as follows:

“In exercise of the powers conferred by sub-section (1) of section 6 of the Integrated Goods and Service Tax Act, 2017 (13 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby rescinds, except as respects things done or omitted to be done before such rescission, the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 15/2017-Integrated Tax (Rate), dated the 30th June, 2017, published in the Gazette of India, Extraordinary, vide number G.S.R. 740(E), dated the 30th June, 2017.”

The highlighted portion proves that the Notification contains a saving clause. Similar wording shall be there in notification to save the omissions made by way of a Notifications.

The next question that may arise is what happens when the amended provisions or corresponding rules and notifications is not saved in above referred ways. If no such saving clause is incorporated, we shall check the applicability of General Clauses Act, 1897. Section 6 of the General Clauses Act, 1897 provides the effect of Repeal which reads as follows

Section 6: Effect of Repeal

Where this Act, or any ¹[Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not--

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

The above section will come into picture when the ‘Central Act’ repeals any enactment. If the State act repeals any enactment, this provision will not come into picture. Also, this Section is not applicable when the repeal is done in rules or in notifications. For easy reference, the Applicability of Section 6 of the General Clauses Act can be categorised as follows:

There are many instances where a section or rule or a notification has been omitted and, in that context, a question may arise whether the ‘omission’ of a particular section or rule or a notification also amounts to repeal or not. In case of Southern Petrochemical Industries Co Ltd Versus Electricity Inspector And Etio & Ors [2007 (5) TMI 591 - Supreme Court], the Supreme Court stated that the purpose of the legislation plays an important role in understanding the effect of omitting any provision/words. Also, the distinguishment between Omission and Repeal is made in the following cases in different forms:

1. Omission can be a form of Repeal - Shree Bhagwati Steel Rolling Mills Versus Commissioner of Central Excise & Another [2015 (11) TMI 1172 - Supreme Court]
2. Omitted provision will not be saved which is otherwise in the case of repeal - Krishna Processors Versus Union Of India [2012 (11) TMI 954 - Gujarat High Court]
3. Omission is different from Repeal – So General Clauses Act, 1897 do not apply to omissions - Mitra Steel & Alloys Pvt Ltd. Vs Commissioner Of C. Ex., Raigad [2005 (8) TMI 22 - CESTAT, MUMBAI]

However, the Supreme Court in case of Rayala Corporation (P) Ltd. & Ors Vs Director Of Enforcement, New Delhi On 23 July 1969 [(1969) 2 SCC 412] held that without a saving clause, the repealed provision is a deemed non-existent & observed that omission does not amount to repeal & Section 6 shall not apply to sub-ordinate legislation. Similar view was held in case of Kolhapur canesugar works Ltd Vs UOI 2000 (119) E.L.T. 257 SC that Section 6 does not apply to a repeal of rule.  In Fibre Board (P) Ltd Vs CIT 2015 (10) SC 333, it was stated that interpretation of the word repeal with omission not being included would be wholly superfluous once Section 6 of General Clauses Act itself would not apply and the Rayala Corp case law was distinguished. The omission of a rule without saving clause does not have the effect of repeal and no saving prospects are eligible under the General Clauses Act, 1897.

Recently, this issue has come up before the Bombay High Court in case of Hikal Limited Vs. Union Of India and Others [2025 (9) TMI 806 – Bombay High Court] in the context of omission of Rule 96(10) of CGST Rules, 2017 vide Notification No. 20/2024 CT dated 08-10-2024. The High Court has stated that the above referred notification does not contain any express saving clause preserving actions, proceedings, or liabilities arising under the omitted rule, thereby, all undisposed Show Cause Notices, Orders disposing of Show Cause Notices issued after the 08^th Oct 2024, or Orders passed before 08^th Oct 2024 but Appeal filed before the Appellate Authorities, Challenges before the Bombay High Court i.e., proceedings which are not closed on the matters concerning Rule 89(4B) and 96(10) of the CGST Rules, 2017 shall lapse. Further, in the absence of express saving clause in the notification, and a repeal or amendment by a Central Act, the general saving provision under Section 6 of the General Clauses Act, 1897 does not automatically apply to such omission of subordinate legislation.

Similar view was taken in case of Lucky Dyeing Mills Pvt Ltd and Sunil Dyg & Pth Mills Versus Commissioner of C.E. & S.T. -Surat-I [2024 (10) TMI 214 - CESTAT AHMEDABAD],  Messrs Addwrap Packaging Pvt. Ltd. & Anr. Vs. Union of India & Ors. [2025 (6) TMI 1156 – Gujarat High Court] Sri Sai Vishwas Polymers Vs. Union Of India and Another [2025 (5) TMI 1811 – Uttarakhand High Court].

In this context, it is also important to know what can be considered as past and closed as the relief given by above referred decisions is not available to the past and closed cases. The same be understood from below table

Conclusion: The interpretation by High Courts under GST has reinforced the critical role of saving clause in maintaining legal consistency and protecting the interests of both taxpayers and the state. The below points can be verified to check the impact of any repeal or omission before concluding that it can be treated as revoked or abrogated and removed from what is popularly known as the statue book

1. Check whether the statue provides any specific saving clause
2. Check whether the Finance Act in which the old statute is amended contains any saving clause
3. Check whether the Notification in which a particular Rule or a Notification is being amended contains any saving clause
4. Check whether the Central Act is repealing any enactment, if yes, check the applicability of Section 6 of General Clause Act, 1897

Special acknowledgments to Chintala Deepthi and Kandula Sumanth for helping the authors in bringing out this article.

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