ADVANCE RULING GIVEN BEYOND 90 DAYS BY THE AUTHORITY FOR ADVANCE RULING – VOID?

[Mr. M. GOVINDARAJAN]

Advance Ruling

Section 95(a) of CGST Act defines the expression ‘advance ruling’ as a decision provided by-

• the Authority for Advance Ruling; or
•  the Appellate Authority for Advance Ruling; or
•  the National Appellate Authority for Advance Ruling

 to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 or of section 101C, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

Authority for Advance Ruling

Section 96 provides that the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

Questions on which advance ruling can be sought

Section 97(2) provides that the question on which the advance ruling is sought under this Act, shall be in respect of,–

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Filing application

An applicant desirous of obtaining an advance ruling may make an application in such form GST ARA 01 along with a fee of ₹ 10,000/- (₹ 5000/- CGST + ₹ 5000/- SGST), stating the question on which the advance ruling is sought.

Disposal of application

• On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the concerned officer and, if necessary, call upon him to furnish the relevant records.
• The Authority may, after examining the application and the records called for and after hearing the applicant or his authorized representative and the concerned officer or his authorized representative, by order, either admit or reject the application.
• Where an application is admitted the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority and after providing an opportunity of being heard to the applicant or his authorized representative as well as to the concerned officer or his authorized representative, pronounce its advance ruling on the question specified in the application.
•  The Authority shall pronounce its advance ruling in writing within ninety days from the date of receipt of application.

Advance ruling to be void in certain circumstances

Where the Authority finds that advance ruling pronounced by it has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made there under shall apply to the applicant or the appellant as if such advance ruling had never been made.

Issue

The issue to be discussed in this article is whether the advance ruling will be void if the same is rendered by the Authority for Advance Ruling after the lapse of 90 days from the date of receipt of the application seeking for advance ruling with reference to decided case law.

Case law

In re ‘Vaishanavi Splendour Homeowners Welfare Association’ – 2019 (11) TMI 155 - AUTHORITY FOR ADVANCE RULING, KARNATAKA the applicant is an association of apartment owners.  The association has 88 members and each of them contributes towards the maintenance of common areas/facilities, lightings in the common areas, water etc. The contributions of each member work out to more than ₹ 7500 per month.

The applicant sought for advance ruling on the following questions-

1. Whether the applicant is liable to pay CGST and SGST on the amount of contribution received from its members?
2. If yes, whether it can avail the benefit of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (Sl. No. 77) read with Notification No. 02/2018-Central Tax (Rate), dated 25.01.2018 which provide for exempting from tax, the value of supply up to an amount of ₹ 7500/- per month per member?
3. If the answer to (ii) is ‘yes’, whether it is required to restrict its claim of input tax credit?
4. Whether the applicant is liable to pay CGST/SGST on amounts which it collects from its members for setting up a corpus fund?

The Authority for Advance Ruling held that-

1. The applicant is liable to pay CGST and SGST on the amount of contribution received from its members as their activities amount to taxable supply of service.
2. The benefit of exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended by Notification No. 2/2018-Central Tax (Rate), dated 25.01.2018) is available to the applicant only if maintenance charges do not exceed ₹ 7500/- per month per member.  In case the charges exceed ₹ 7500/- per month per month the entire amount is taxable.
3. The applicant is eligible to claim input tax credit on the inward supplies of goods and services and this is subject to the restrictions as enumerated n Section 17(2) of CGST Act read with Rule 42 of the CGST Rules and other restrictions applicable if any.
4. The applicant is not liable to pay CGST/SGST on amounts which it collects from its members for setting up its corpus fund.

The applicant filed an appeal before the Appellate Authority for Advance Ruling against the findings of the Authority for Advance Rulings on point nos. (i) and (ii).  Among the grounds of appeal, the appellant contended that the ruling pronounced by the Authority after the mandated period of 90 days is unsustainable in law.  The appellant relied on the Supreme Court decision in ‘Danish Aarthi v. M. Abdul Kapoor’.  In this said case the Supreme Court held that if a thing is prescribed to be done within a particular period, it shall be done within that particular period or shall not be done at all.  The Appellant contended that the Rulings given by the Authority for Advance Ruling may be set aside on the ground that the ruling was given beyond 90 days prescribed.

The Appellate Authority held that the ruling was given by the Authority for Advance Ruling has been passed after the time period stipulated under the statute.  However that does not render the ruling null and void or unsustainable.  An order which is passed without jurisdiction can be held to be null and void and unsustainable.  However, an order suffering from illegality or irregularity of procedure cannot be termed in executable.  The remedy of a person aggrieved by such an order is to have it set aside in duly constituted legal proceedings.  The Authority that the order of Supreme Court relied on by the appellant is not applicable to this case.  In the said case the Supreme Court  was examining the actions to be performed by a tenant under Rent Control Act before filing a petition before the Rent Controller.

The Appellate Authority for Advance Ruling held that the Authority for Advance Ruling was well within its jurisdiction to pass a ruling on the subject matter.   Not adhering to the time limit in passing an order can be termed as an irregularity in procedure which can be set right in appeal proceeding.