Advance Ruling Application Not Restricted Only To Supplier: Rajasthan High Court Quashes AAR's Order Rejecting Application

The Rajasthan High Court, Jaipur Bench, has quashed the AAR's order rejecting the application for the advance ruling as not maintainable on the grounds that the applicant was not the supplier.

The bench of Justice Avneesh Jhingan and Justice Ashutosh Kumar has observed that the appeal against the advance ruling is provided under Section 100 of the CGST Act. The concerned officer, the jurisdictional officer, or the applicant can prefer an appeal against the ruling given under Section 98(4). No appeal is provided against rejection of the application under Section 98(2) of the CGST Act. The application of the petitioner was ousted at threshold under Section 98(2) as not maintainable. Section is unambiguous that an appeal can be filed only against the orders pronounced under Section 98(4) of the CGST Act.

The petitioner/assessee is registered under the Goods and Services Tax Act, 2017 and is engaged in transmission of electricity. During the course of business, the petitioner engages contractors. In the course of execution of the contract, supply of material ex-work is made. The contractor transports goods and raises invoices for transportation. The petitioner filed an application for an advance ruling on the issue as to whether, in facts of the case, transportation of goods is exempt under Serial No.18 of Notification No.12/2007 Central Tax (Rate).

The AAR-held application under Section 97 of the Central Goods and Service Tax Act, 2017 is not maintainable, as the petitioner was not the supplier.

The petitioner contended that in case of non-applicability of the exemption notification, the petitioner shall be liable to pay tax on a reverse charge basis, the services being in the notified category. The contention is that in Sections 95 and 97 there is no restriction that the application for advance ruling can be made only by the supplier.

The department contended that objects that the impugned order is appealable. However, the advance ruling can be sought by the supplier or proposed supplier. The petitioner is not covered under the definition of supplier.

Chapter XVII of the CGST Act deals with advance rulings. Definitions are in Section 95, and it starts with “unless context otherwise requires." Under Clause (a), an 'advance ruling' is a decision of the Authority, the Appellate Authority, or the National Appellate Authority at the instance of the applicant on matters or on the issues specified in Sub-Section (2) of Section 97 or Sub-Section (1) of Section 100 or of Section 101C and in relation to the supply of goods or services, or both, being undertaken or proposed to be undertaken by the applicant. Clause (b) defines appellate authority for advance ruling as referred to in Section 99. Under Clause (c), 'applicant' is defined as any person registered or desirous of obtaining registration under the Act. Application under Clause (d) means an application made to the Authority under Section 97(1).

Section 97(1) provides that an application for an advance ruling can be filed by any applicant desirous of getting an advance ruling. An application stating the question to be asked is to be made in the prescribed manner and accompanied by the fee prescribed. Section 97(2) prescribes the issues for which the question for an advance ruling can be sought. Clause (b) of Sub-Section 2 “applicability of notification issued under the provisions of this Act” would be relevant for the present case.

Section 98 provides the procedure to be adopted on receipt of an application for an advance ruling. Under subsection 2, the authority, after examining the application, recording it, and providing an opportunity of hearing to the applicant and the officer concerned, has to pass an order either admitting or rejecting the application. Proviso to Sub-Section 2 provides that the application for advance ruling shall not be admitted on the question raised, pending, or decided in the case of the applicant under any of the provisions of the CGST Act.

As per the second proviso, the application shall not be rejected without granting an opportunity of hearing. The third proviso stipulates for specifying the reasons in the order for rejecting the application. Sub-Section 3 obligates the supply of the order passed under Sub-Section 2 to the applicant and the concerned officer. As per Sub-Section 4, the authority, after examining the material placed before it and after providing an opportunity of hearing, shall pronounce an advance ruling on the questions asked. Sub-Section 5 deals with the procedure to be adopted in case there is a difference of opinion amongst the members of the Authority. Sub-section 6 obligates the authority to pronounce the advance ruling within ninety days of the receipt of the application. Sub-Section 7 prescribes that ruling shall be pronounced and signed by the members and certified in the prescribed manner.

The court quashed the AAR order and remanded the matter back to AAR for deciding the application afresh under Section 98(4) of the CGST Act.

Counsel For Petitioner: Narendra Singhvi

Counsel For Respondent: Kinshuk Jain

Case Title: M/s Power Grid Corporation Of India Ltd. Versus State of Rajasthan

Citation: 2024 LiveLaw (Raj) 172

Case No.: D.B. Civil Writ Petition No. 11370/2021

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