TMI Blog2022 (11) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... r is referred to them under Section 98(5). Where a ruling has been pronounced by the lower Authority an appeal by the aggrieved party lies before us and we, under the appeal proceedings, can pass such order as we think fit, either confirming or modifying the ruling. In the instant case, there is no ruling pronounced by the lower Authority on the question of taxability. In the absence of a ruling, there is nothing for this Authority to confirm or modify. We can only go so much as to say whether the lower Authority was correct in not giving a ruling on the question of taxability which we have already held as being incorrect. The statute is unambigiously clear that an order passed under Section 98(2) rejecting an application cannot be appealed before us. The fact that only a ruling pronounced in an order issued under Section 98(4) is appealable before us justifies our stand that 'modifying' does not include answering the unanswered question. We therefore, do not agree with this argument put forth by the Appellant - The Appellant has also made out a case that the powers of this Authority includes remand even if the said power has not been explicitly stated in Section 101(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n foreign exchange, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:- a. Whether the transaction of providing space on its web portal for advertisements provided by a foreign entity ie Lenzing Singapore Pte Ltd for a consideration, is taxable? b. Consequently, what will be the correct classification of the services provided and rate of tax on the transaction of providing space on its web-portal for advertisements provided by a foreign entity i.e Lenzing Singapore Pte Ltd? 5. The AAR vide its order KAR ADRG No 19/2022 dated 1st July 2022 gave the following ruling in respect of the above questions:- a. No Advance ruling is given on question (a)above, as the question involves the determination of place of supply which is outside the jurisdiction of this Authority. b. The services provided by the Applicant are classified under SAC 998365 which reads Sale of internet Advertising Space (except on commission) and the same is chargeable to CGST at 9% and SGST at 9% as per SL.No 21 of Notification No 11/2017 CT (Rate) dated 28-06-2017. 6. Aggrieved by the lack of ruling given by the AAR on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 97(2)(e) of the CGST Act. 6.3. The Appellant relied on the Kerala High Court decision in the case of Sutherland Mortgage Services INC vs Principal Commissioner reported in 2020 115 taxmann.com 82 (Kerala) wherein the Hon'ble High Court had dealt with the provisions of Section 97(2)(e) of the CGST Act in the context of jurisdiction of the Advance Ruling to decide whether any transaction amounts to export or not; that the Hon'ble High Court had held that there cannot be any two arguments that the issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfils the definition of place of service, would also come within the ambit of the larger issue of 'determination of liability to pay tax on any goods or services or both' as envisaged in clause (e) of Section 97(2) of the CGST Act. They submitted that the above judgment of the Kerala High Court is binding on the Authority in the absence of any contrary decision by the jurisdictional High Court and therefore, the impugned ruling is liable to be set aside. 6.4. The Appellant also drew attention to the decision of the Karnataka Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice recipient, which is outside India. Alternatively, they submitted that even if they were considered as providing OIDAR services since the definition of OIDAR service includes advertising on the internet, then by virtue of the provisions of Section 13(13) of the IGST Act, the place of supply will be the location of the recipient of services. Since in either case, be it by application of Section 13(2) or 13(13) of the IGST Act, the place of supply of service is the location of the recipient of service which is outside India, the Appellant qualifies as an exporter of service to Lenzing. Since the transaction entered into by the Appellant with Lenzing, Singapore amount to an export of service, it qualifies as a zero-rated supply and is thus non-taxable. In view of the foregoing, the Appellant pleaded that the impugned order to the extent that it does not decide ruling on question of taxability may be set aside; that it may be held that the AAR has the jurisdiction to decide the question involving the determination of place of supply and it may be held that the activity Sale of Internet Advertising Space (except on commission) falls within the meaning of export of service and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i), (ii), (iv) and (v) of Section 2(6) of the IGST Act which defines 'export of service'; that they also meet condition (iii) of the definition in as much as the place of supply is outside India and they justified this by relying on Section 13(2) of the IGST Act which they claim is applicable in their case. He submitted that no other sub-section in Section 13 applies to them. He also submitted that even if it was assumed that they are OIDAR service providers, even then, in terms of Section 13(12) of the IGST Act, the place of supply of OIDAR services will be the location of the recipient. He however made it clear that the Advance Ruling Authority had already given a ruling on their service is classified as Advertising service which is accepted by them. 7.4. A query was made by the Bench drawing attention to Section 101 of the CGST Act wherein it is laid down that the Appellate Authority can pass an order as deemed fit, confirming or modifying the ruling. It was pointed out by the Bench that their order can only confirm or modify a decision already taken by the lower Authority. When the lower Authority has not decided anything, then there is nothing for this Authority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAR. In this regard they submitted that the Appellate Authority for Advance Ruling had been granted powers to pass such orders 'as it thinks fit' and which includes confirming or modifying the ruling appealed against; that the expression 'as it thinks fit' confers wide jurisdiction to decide on issues which are germane to taxability and are not restricted to questions specifically decided by the AAR. They submitted that the Appellate Authorities are vested with powers to pass orders which are necessary for not rendering the appellate remedy as infructuous or nugatory; that the appellate powers are an extension of original proceedings before the lower authorities and thus, vests powers to decide questions which are germane to the dispute involved. In the present facts, the AAR has erroneously and illegally not decided the issue relating to taxability of the services rendered by the Appellant to its customers. Therefore, in exercise of appellate powers, such questions can be decided by the Appellate Authority. In this connection, they relied on the Supreme Courts decisions in the case of Babulal Nagar and Ors vs Shree Synthetics Ltd and Ors (1984 (Supp) SCC 128 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute. An appellate power is a power relating to remedies and has to be construed widely to make the remedy effective. Such powers cannot be interpreted in a manner which defeats the purpose of granting remedy itself which is to correct errors committed in the impugned order. The appellate remedy cannot be construed in a manner that leads to redundancy of the appellate powers and allows for perpetuation of an error committed in the impugned order. 8.3. The Appellant submitted that the term 'modifying' means change, alteration or amendment; that the term modifying has to be construed widely as held by the Supreme Court in the case of Puranlal Lakhanpal vs President of India and Ors - AIR 1961 SC 1519; that the powers of this Authority to 'modify' the ruling appealed against and pass such orders 'as it thinks fit' is plenary in nature and such power is not restricted to issues that were decided or not decided by the AAR; that the order which fails to decide an issue which ought to have been decided by the AAR can be modified by rendering a finding on that issue. The Appellant also submitted that this Authority has the power to remand; that Section 101(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign entity is taxable under GST, the lower Authority failed to give a ruling citing the reason that the question involves determination of place of supply which is outside the jurisdiction of the Authority. The Appellant is before us in appeal on the limited aspect the lower Authority's decision not to give a ruling on the issue of taxability on the grounds of lack of jurisdiction is incorrect and bad in law. 10. In order to decide whether the lower Authority was correct in not giving a ruling on the question of taxability on the grounds that it involves determination of place of supply which is beyond the jurisdiction of the Authority, let us look into the provisions of law relating to the questions on which an advance ruling can be sought. Section 97(2) of the CGST Act states that the question on which the advance ruling is sought under the 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made the said provision envisaging that in transactions in nature, where India is now a growing economy and has to make its substantial performance in economic growth and development not only domestic investments, but even foreign investments would also be heavily required and that host of tax laws has been subsumed into the overarching umbrella of the goods and sales tax regime introduced by the Parliament and the Parliament would have certainly taken cognizance of the fact and has intended that very often applicants would require clarity and precision about various aspects of taxation in the transactions and that there should be certainty and precision in those matters, so that the applicant concerned is given the right to seek advance ruling even in such a larger issue as the one as per clause (e) of Section 97(2) of the CGST Act, which deals with issue of determination of liability to pay tax on any goods or services or both. 11. The above decision of the Kerala High Court has not been appealed against by the Department and has also been subsequently referred to and relied upon by several State Advance Ruling Authorities and Appellate Authorities, including this Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the members of the lower Authority differ on any questions on which an advance ruling is sought, then, in terms of Section 98(5) of the CGST Act, they shall state the points of difference and refer the matter to the Appellate Authority who will hear the case and decide the question on merits. Section 101(1) of the CGST Act states The Appellate Authority may, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to. It is therefore evident from the provisions of the statute that the Appellate Authority can pass an original ruling only when the matter is referred to them under Section 98(5). Where a ruling has been pronounced by the lower Authority an appeal by the aggrieved party lies before us and we, under the appeal proceedings, can pass such order as we think fit, either confirming or modifying the ruling. In the instant case, there is no ruling pronounced by the lower Authority on the question of taxability. In the absence of a ruling, there is nothing for this Authority to confirm or modify. We can only go so much as to say whether the lower Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the lower Authority was correct in not passing a ruling on the question of taxability. Therefore, we disagree with the Appellant's contention that we have the authority to go beyond and decide the point on merits when there has been no ruling by the lower Authority. 14. The Appellant has also argued that the word 'modifying' as appearing in Section 101(1) has to be construed widely; that the power to modify the ruling appealed against and pass such orders as it thinks fit are plenary in nature and such power is not restricted to issues that were decided or not decided by the lower Authority. The Appellant has relied on certain Supreme Court decisions which were rendered in the context of the appeal provisions of other taxation laws/statutes. The provisions relating to Advance Ruling as contained in Chapter XVII of the CGST/KGST Acts are not pari materia to the provisions relating to Appeals under any of the taxation laws like Income Tax, Customs, Central Excise/Service Tax or other statutes in the country. As already discussed, Chapter XVII of the CGST/KGST Acts are very clear and unambigious on the procedures to be followed by the Advance Ruling Authority a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the provision that applications rejected in terms of Section 98(2) are not appealable before the Appellate Authority substantiates the understanding that when any ruling pronounced by the lower Authority is appealed before us, we have to decide the issue and not remand it to the lower Authority. However, in this case the situation is peculiar. The question of taxability having been rejected by the lower Authority albeit incorrectly, without any ruling, the matter is not appealable as per the law. But considering the fact that the lower Authority's actions of not answering the question of taxability on the grounds of jurisdiction has been held as incorrect by us, we are constrained, in the interests of justice to send the matter back to the lower Authority to pronounce a ruling on the question of taxability after considering the place of supply provisions. In our opinion this would meet the ends of justice for the Appellant. We also observe that the direction for remand has also been resorted to by other AAARs in the following cases:- a) D.M Net Technologies - Gujarat AAAR order dated 22-08-2022 b) Portescap India Pvt Ltd - Maharashtra AAAR order dated 3-11-2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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