The Hon’ble Madhya Pradesh High Court in the case of Mahendra Singh Versus Assistant Commissioner State Tax And Others - 2025 (9) TMI 862 - MADHYA PRADESH HIGH COURT held that an Advance Ruling (AAR) issued in the name of another distinct GSTIN holder cannot be mechanically applied to a different GST-registered person, and the adjudicating authority must independently examine the facts of the case instead of relying on non-binding precedent.
Facts:
Mahendra Singh ('the Petitioner') is the proprietor of a pan shop with its own distinct GSTIN and independent business, operating under the Karnawat Paan brand with annual receipts below Rs. 20 lakhs.
The Assistant Commissioner State Tax ('the Respondent') issued a show cause notice and subsequent demand order under Section 74 of the CGST Act, 2017, demanding Rs. 64.89 lakh in tax, interest, and penalty, based on the Authority for Advance Ruling (AAR) ruling delivered in the matter of In Re: Gulab Singh Chauhan - 2021 (12) TMI 33 - AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH, who is the head of the Karnawat Paan group, disallowing composition scheme benefits to him and related entities.
The Petitioner contended that as an independent GST registrant with distinct PAN and business, the AAR ruling against Gulab Singh Chauhan is not binding on him under Section 103 of the CGST Act and cannot be enforced mechanically.
The Respondent contended that since multiple family-run firms operate under the Karnawat Paan brand and use related trademarks, the AAR ruling against the head of the group applies to the Petitioner as a sister concern.
Aggrieved by the demand order based on the non-speaking order that simply rejected the Petitioner's reply as 'not satisfactory' without reasoned analysis, the Petitioner approached the Madhya Pradesh High Court by a writ petition under Article 226 of the Constitution, seeking quashment of the SCN and demand order.
Issues:
- Whether an AAR ruling delivered in the name of another distinct GSTIN holder under the same brand can be applied bindingly to a different GSTIN holder with an independent business?
- Whether the adjudicating authority can rely on such ruling without independent examination and a speaking order?
Held:
The Hon’ble Madhya Pradesh High Court in Mahendra Singh Versus Assistant Commissioner State Tax And Others - 2025 (9) TMI 862 - MADHYA PRADESH HIGH COURTheld as under:
- Observed that Section 103 of the CGST Act clearly limits the binding effect of an AAR ruling to the applicant and officers concerned and thus the AAR ruling in Gulab Singh Chouhan’s case does not bind the Petitioner.
- Noted that the Petitioner is a distinct person with an independent GSTIN and business and the authorities must independently examine the facts of the Petitioner’s case rather than mechanically applying the AAR ruling.
- Held that the impugned non-speaking order which only dismissed the Petitioner’s reply as unsatisfactory without reasoned discussion, amounting to lack of fair adjudication.
- Quashed the SCN and demand order for lack of independent examination and reasoned order and directed the adjudicating authority to decide the show cause notice afresh on merits uninfluenced by the AAR in Gulab Singh Chouhan’s case.
Our Comments:
This ruling underscore the principle that AAR rulings under Section 98 of the CGST Act bind only the applicant and the officers in the state concerned, and do not bind other distinct GSTIN holders, even if under the same brand. The Revenue’s reliance on familiar or brand association to extend an AAR ruling without case-by-case examination is rejected, reaffirming taxpayer-specific rights.
Relevant Provisions:
Section 103 of the CGST Act, 2017:
“(1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only-
(a) on the applicant who had sought it in respect of any matter referred to in sub section (2) of section 97 for advance ruling;
(b) on the concerned officer or the jurisdictional officer in respect of the applicant.”
(Author can be reached at [email protected])