12771GST UPDATE ON POWER OF HIGH COURT IN CASE OF DECISION BY AAAR

GST law allows a taxpayer to apply for an advance ruling to obtain clarifications from the Authority for Advance Ruling (‘AAR’). If the taxpayer or the Revenue Authority is aggrieved by the order passed by the AAR, they have an option to file an appeal before the Appellate Authority for Advance Ruling (‘AAAR’). The ruling pronounced by AAR / AAAR is binding on all such parties. However, no further remedy by way of an appeal is provided under the GST law against the order of AAAR. Can an assessee file writ petition against the order of AAAR?
The same matter was discussed in the case of JSW energy ltd by Bombay High court where assessee has filed writ petition to HC against the order of AAAR. The HC has declined the examination of the case on the basis of merits because there is no provision under GST to appeal against the order of AAAR. The case was remanded back to the AAAR for the fresh consideration on the basis of merits. Supreme Court in the case of Smt. Sudha Patil also took the similar view that in case no appellate provision are given in the law it does not enlarge the power of High Court to exercise an appellate power.
Assessee can apply to the writ petition in HC in the exceptional cases like where principle of natural justice is not followed or assessee is challenging the constitutional validity of a provision. Moreover, in the cases where AAAR does not follow proper decision-making process, the court can refer back case to AAAR without examining the case on basis of merits as the same was held in case of C.M.S. Info Systems Ltd.
Decision of AAR is final and binding on the assessee and concerned departmental officers till the time there are changes in law, facts and circumstances supporting the advance ruling. This is clearly given in Sectio 103(2) of CGST Act, 2017. In case of changes in law, facts etc after ruling by AAR/AAAR the binding nature of ruling comes to an end but if circular in issued in subject matter after the AAR ruling than it will not affect the AAR ruling because circulars are not considered as change in law and they are only binding on department.
From the above reference to the case laws, it is clear that decision of the AAR final or binding and the Court may not accept the petitions challenging the AAAR ruling. It can be said that the order passed by the AAAR cannot be challenged in the High Court under GST law. It can only be challenged in case the AAAR goes beyond its jurisdictional limits or breach of principles of natural justice or committing errors of law or constitutional validity of a provision is being challenged.
Moreover, we have seen that the CBIC has many times given a clarification by way of circular over an issue where AAR has given verdict. One example can be of salary paid to directors. Advance Ruling of Rajasthan said in case of Clay Craft India Private Limited that GST is payable on the same but the CBIC has clarified vide circular number 140/10/2020 – GST dated June 10, 2020contrary to the same. Such type of situations arise in many cases.
But the circular cannot be said to be amendment in law or facts. Hence, these are not binding. It leads to peculiar situation where all taxpayers are taking benefit of CBIC circular which is against the appellant. The applicant who has sought advance ruling has to follow it as per provision of Section 103 of CGST Act ibid. He cannot even go to High Court as per above referred decisions. But some advocates are of the opinion that above advance ruling can be challenged on the basis of discrimination.
These all difficulties are attached with Advance Ruling. But the pro-revenue approach of departmental officers appointed in Advance Ruling has given a signal to taxpayers not to approach advance ruling. To save this authority, trade and industry should demand national level authority of advance ruling. Secondly, it should also be demanded that judicial member should be appointed so that confidence of taxpayers is restored in Advance Ruling authority.

Comments

12771GST UPDATE ON POWER OF HIGH COURT IN CASE OF DECISION BY AAAR

Post a Comment

Query