GST UPDATE ON BINDING NATURE OF ADVANCE RULING PART-2

GST UPDATE ON BINDING NATURE OF ADVANCE RULING PART-2:-

In our earlier update, we have discussed the situation where government has issued clarification after advance ruling has also pronounced its decision on a particular issue. In the present update, we wish to discuss the binding nature of advance ruling vis a vis clarification issued by the government from the point of view of assessee.

It is pertinent to mention that as per section 103(1) of the CGST Act, 2017, the advance ruling pronounced shall be binding only on the applicant who had sought it and on the concerned jurisdictional officer of the applicant. Furthermore, provision contained in sub-section (2) of the section 103 states that the advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.

With respect to example no. 2 taken in our earlier update, it is worth mentioning that while pronouncing the decision by Advance Ruling, the fact that IIM Act has been implemented with effect from 31.01.2018 was considered and adverse opinion was framed that IIM is not eligible for availing the benefit of general exemption contained in serial no. 66(a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. However, on representation made to the government, clarification was issued vide Circular No. 82/01/2019-GST dated 01.01.2019 wherein it was clarified that after enactment of the IIM Act, they are eligible to claim benefit of general exemption contained in serial no. 66(a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 on the grounds that assessee has the option to avail either general or specific exemption. It is noted that there is no change in the facts or circumstances supporting the original advance ruling. However, clarification has been issued in favour of the assessee by the government. Now, the question arises is that whether issuance of clarification vide Circular can be considered as change in law so as to invoke the provisions of section 103(2) in case of IIM Bangalore and IIM Madhya Pradesh? It is usually believed that circulars are clarificatory in nature and they only explain the existing position of law. Consequently, whether the circular dated 01.01.2019 would be treated as amendment in law so as to enable IIM Bangalore and Madhya Pradesh to avail the benefit of the same or they would be require to challenge the advance ruling in appellate authority/courts to get the decision nullified?
Well, if we go back to erstwhile Central Excise Laws and Service Tax Laws, we find that it was held by the Apex Court in the case of BIRLA JUTE AND INDUSTRIES LTD. VERSUS ASSISTANT COLLECTOR OF C. EX. [2005 (179)ELT 272(Supreme Court)] that Board Circulars are not binding on the assessees and they may opt not to follow these Circulars. As such, the circulars are not binding on the assessees and they are at liberty to challenge the same. But, in the present case, the situation is reverse that the clarification is favourable to the assessee and the advance ruling is against the assessee. The binding nature of the advance ruling is clear by the provision contained in section 103 of the CGST Act, 2017 and so the only alternative available with the assessee is to challenge the advance ruling before the appellate forum/courts. It is submitted that this situation definitely puts the applicant of advance ruling in disadvantageous position as the applicant has to bear litigation cost to nullify the adverse impact of advance ruling. In our opinion, such a provision is unfair and unreasonable as the applicant of advance ruling cannot be discriminated and deprived of the benefit of clarification applicable to all assessees merely on the grounds that there is adverse ruling pronounced in his case. Such a provision is discriminatory in nature and is not sustainable in light of decision given by the Supreme Court in the case of JAYASWALS NECO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2006 (195) E.L.T. 142 (S.C.)] and COMMISSIONER OF C. EX., HYDERABAD VERSUS NOVAPAN INDUSTRIES LTD. [2007 (209) E.L.T. 161 (S.C.)]

This is solely for the educational purpose.
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GST UPDATE ON BINDING NATURE OF ADVANCE RULING PART-2

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