May 17, 2023 [Taxguru.com]
By Anshul Mittal, Partner at RSA Legal Solutions
The recent legal dispute regarding Anmol Industries Ltd’s application for an advance ruling on the applicability of an exemption notification issued under the GST Act, and the subsequent rejection of the application by the West Bengal Authority for Advance Ruling (AAR) due to lack of locus standi, followed by the reversal of the ruling by the Calcutta High Court, underscores the importance of a comprehensive understanding of relevant laws and provisions when interpreting legal disputes.
The applicant had entered into a leasing agreement with Shyama Prasad Mookerjee Port, Kolkata, and had agreed to pay an upfront lease premium, which they believed was exempt from GST under entry No. 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. However, the AAR rejected the application on the grounds that the applicant was a recipient of services and therefore did not have the locus standi to file the application for advance ruling.
The applicant’s representative argued that the definition of the word “applicant” as defined in section 95(c) of the GST Act provides that any person registered or desirous of obtaining registration under the Act can apply for an advance ruling. Therefore, the applicant contended that the provisions nowhere state that the applicant has to be a service provider to seek an advance ruling on the questions as stated above.
The AAR rejected the applicant’s argument and observed that in the subject application, the applicant cannot seek an advance ruling in relation to the supply where they are a recipient of services.
Calcutta High Court
However, in an intra-Court appeal filed by the applicant in The High Court of Calcutta, through writ petition against the order passed by the AAR, the Court observed that under Section 95(c) of the Central Goods and Services Tax Act, 2017, the term “applicant” has been defined to mean any person registered or desirous of obtaining registration under the Act. Since the appellants were registered under the provisions of the Act, they clearly fell within the definition of “applicant”. Therefore, the Court held that the AAR should have considered the application on merits rather than rejecting it on the ground of lack of locus standi.
The Court also referred to a previous case where it had held that the definition of “applicant” under Section 95(c) of the Act was wide enough to include any person registered or desirous of obtaining registration under the Act. Therefore, in light of this precedent, the Court allowed the appeal and set aside the order passed in the writ petition. The Court also remanded the matter back to the AAR to decide the application on merits and in accordance with law.
This case underscores the importance of interpreting legal disputes in accordance with the relevant laws’ definitions and provisions. It also reinforces the fundamental principle that all parties should be given a fair chance to present their case and have it decided on its merits.
It is crucial to comprehend the scope of definitions such as “applicant” and other relevant provisions in determining who has the right to file an application and seek an advance ruling. The Court’s ruling in this case highlights the significance of interpreting such definitions in a manner that does not limit the parties’ access to legal remedies. Therefore, it is essential to carefully analyze and understand the provisions of the law while interpreting and deciding legal disputes.
Unintended fall out of the Decision
While the recent court order is a welcoming decision for parties seeking advance ruling, it is likely to open gates for a lot of litigation and result in an increasing number of applications for advance ruling. It is important to note that an advance ruling is only applicable to the party who applies for it, and not to any other parties who may be affected by the ruling.
If a recipient applies for an advance ruling and the ruling is against the practice followed by the supplier, it may be difficult to enforce the ruling on the supplier. In case the advance ruling comes opposite to the correct GST practice, and the supplier changes their practice based on the ruling, it is unclear whether the advance ruling would be able to rescue the supplier who actually did not apply for the ruling and is practicing according to the ruling.
Therefore, while seeking advance ruling is a viable option to avoid any confusion and legal disputes, parties must also consider the potential consequences and ensure that they are following the correct GST practices
2023-TIOL-26-AAR-GST, Anmol Industries Ltd and Anr v/s The West Bengal Authority for Advance Ruling, Goods And Services Tax and Ors. 2023-TIOL-526-HC-KOL-GST, M/s. Gayatri Projects Limited & anr. vs. The Assistant Commissioner of State Tax, Durgapur Charge & Ors. 2023-TIOL-52-HC-KOL-GST