A division bench of the Madhya Pradesh High Court has held that the authority for advance ruling (AAR) under GST cannot be sought after the initiation of assessment proceedings when the department issued a show-cause notice.
The Petitioner, Saisanket Enterprise, is a Works Contractor engaged in executing works related to the construction of the irrigation dam. The petitioner is duly registered under Central Goods and Services Tax Act, 2017 in various states.
The premises of the petitioner was searched by the authorities of the Director-General of Goods and Service Tax Intelligence and found evasion of GST. Vide notice dated 21.05.2020, the petitioner was called upon to discharge the remaining GST liability in Form DRC-03 at the applicable rate of 18% on works contract services supplied as a sub-contractor to the main contractor.
After this, the petitioner approached the AAR bench seeking clarification on the rate of GST applicable on the subject goods. However, the application was rejected on the ground that the matter is pending before the authorities.
A bench of Justice Vivek Rusia & Justice Amar Nath (Kesharwani) has classified that advance ruling as a decision provided by the Authority or Appellate Authority to the applicant on matters or on questions in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
It means any person can obtain a ruling from the Authority or Appellate Authority in advance either during or proposed to be undertaken any supply of goods or services.
The very purpose of taking advance ruling in advance is to avoid any controversy or conflict with the authorities in payment of GST/SGST in particular categories at the time of rendering service or sale of goods.
Application is liable to be filed under section 97 for obtaining the advance ruling in advance not during the pendency of any issue before the authority.
According to the proviso, the authority shall not admit the application where the question raised in the application is already pending or decided in proceedings under any of the provisions of this Act.
The Petitioner approached the Authority for obtaining the advance ruling only after a search conducted on 20.03.2020 in which the evasion of SGST was found which has resulted in issuing a show-cause notice dated 21.05.2020.
By the aforesaid impugned notice, the petitioner has been called upon to pay the remaining amount of GST/SGST liability and submit the reply. Since the petitioner has not paid GST @ 18% and appears to be contesting the aforesaid notice, therefore, the issue is treated to be pending before the Authority under the GST/SGST Act,2017 hence, Authorities have rightly declined to grant advance ruling to the petitioner as the petitioner did not approach in advance before the Authority for obtaining the ruling.
