Advance Ruling Can't Be Sought After The Receipt Of The Notice: Madhya Pradesh High Court

The division bench of Justice Vivek Rusia and Justice Amar Nath has observed that the petitioner approached the authority to obtain the advance ruling only after a search was conducted in which the evasion of SGST was found, which has resulted in the issuance of a show-cause notice. By the notice, the petitioner has been called upon to pay the remaining amount of GST/SGST liability and submit the reply. Since the petitioner has not paid GST at 18%, the issue is treated as pending before the authorities.

The petitioner is a work contractor engaged in executing work related to the construction of the irrigation dam. The petitioner is duly registered under the Central Goods and Services Tax Act, 2017 in various states.

The Navayuga Engineering Company Ltd. had entered into an agreement for the execution of certain work relating to the Narmada Valley Project. Some parts of the work were sublet to the petitioner, which were executed from the period 22.01.2017 to 25.01.2018.

The premises of the petitioner were searched by the authorities of the Director-General of Goods and Service Tax Intelligence and found to be evading GST. The notice was issued calling upon the petitioner to discharge the remaining GST liability on Form DRC-03 at the applicable rate of 18% on work contract services supplied as a subcontractor to the main contractor.

After receipt of the notice, the petitioner approached the authority for an advance ruling in Madhya Pradesh under Section 98 of the Goods and Service Tax Act, 2017. The petitioner contended that, in light of notification No.11/2017 (T (R) as amended on 22.08.2017, the subcontractor's tax rate shall be 12%.

The AAR obtained the comments from the Department and accorded a personal hearing to the parties. The authority declined to grant advance ruling by virtue of the first proviso of section 98(2) of the CGST/MPGST Act, 2017.

The petitioner, being aggrieved by the order of AAR, approached the Appellate Authority by way of filing an appeal under Section 101 of the CGST/MPGSTAct, 2017. The Appellate Authority has dismissed the appeal by upholding the order dated 10.12.2020 passed by the Advance Ruling Authority.

The petitioner contended that the authorities, as well as the Appellate Authority, had failed to correctly interpret the language of Section 98(2) of the CGST Act, 2017. Section 98(2) only bars the advance ruling if the question raised is pending or decided in any proceedings under any provision of the Act. In the present case, no such proceedings are pending against the petitioner. Therefore, the authorities ought to have decided the issue raised by the petitioner regarding the applicability of the rate of tax. Hence, the matter is liable to be remanded back to the authorities for adjudication on merit.

The court noted that an "advanced ruling" is a decision provided by the authority or Appellate Authority to the applicant on matters or on questions in relation to the supply of goods or services being undertaken by the applicant. It means any person can obtain a ruling from the authority or Appellate Authority in advance, either during or proposed to undertake any supply of goods or services. The purpose of taking advance ruling in advance is to avoid any conflict with the authorities in the payment of GST in particular categories at the time of rendering service or sale of goods.

The court has ruled that the authorities have rightly declined to grant an advance ruling to the petitioner as the petitioner did not approach the authority in advance to obtain the ruling.

Case Title: M/s Saisanket Enterprise Versus Authority of Advance Ruling

Citation: 2022 LiveLaw (MP) 163

Dated: 14.06.2022

Counsel For Petitioner: Senior Advocate Ajay Bagadia

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