TaxTMI 
TaxTMI 
TaxTMI 
Advance Ruling
The Advance Ruling is 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 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) 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.
Section 97 (2) of the Act prescribes the questions on which the advance ruling can be sought.
Procedure of obtaining advance ruling
Section 96 provides for the constitution of the Authority for Advance Ruling. Section 97 provides the procedure for filing an application before the Authority for Advance Ruling. Section 98 of the Act provides that the Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application.
Applicability of the Advance Ruling
Section 103 of the Act prescribes the applicability of the advance ruling given by the Authority for Advance Ruling. The said section provides that the advance ruling pronounced by the Authority shall be binding only-
- on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;
- on the concerned officer or the jurisdictional officer in respect of the applicant.
As per the above section the Advance ruling is only applicable to the applicant only. It is the order in personam not in rem. The said ruling is not applicable to the third party. The said ruling cannot be relied on by any party before any legal forum.
The Advance ruling is not applicable to the distinct person. Section 25(4) of the Act defines the term ‘distinct person’. The said section provides that a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Section 25(5) of the Act provides that where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act.
Case law
In Mahendra Singh Versus Assistant Commissioner State Tax And Others - 2025 (9) TMI 862 - MADHYA PRADESH HIGH COURT, Shri Gulab Singh Chauhan filed an application for advance ruling before the Authority for Advance Ruling, Madhya Pradesh to get a ruling on the question as to whether the business model of selling Pan Masala, tobacco products will come under the composition scheme if the turnover does not exceed Rs.1.5 crores in the preceding financial year. The Authority for Advance Ruling ruled that the applicant is fully covered under the restrictive condition of Section 10(2)(b) & (e) of the Act and the composition scheme under Section 10 of the Act shall not be available to him.
The petitioner, in the present writ petition, is a proprietor of a pan shop having an independent GST number and his annual receipts were below Rs.20 lakhs. The GST Authorities issued a show cause notice to the petitioner under Section 74 of the Act demanding the tax, interest and penalty to the tune of Rs.64,89,965/-. The petitioner filed the present writ petition challenging the said show cause notice. However, the petitioner filed reply to the show cause notice. During the pendency of the writ petition the GST Authority passed the order confirming the demand in the show cause notice on the ground that the Authority did not satisfy on the reply given by the petitioner.
The GST Authority filed counter to the writ petition after receiving the notice from the High Court.
The writ petitioner submitted the following before the High Court-
- The proceedings were initiated by the Department based on the Advance Ruling given in the case of Shri Gulab Singh Chauhan.
- The above said advance ruling is not applicable to the petitioner since the petitioner is a distinct person.
- The advance ruling is binding only on Shri Gulab Singh Chauhan and not on him.
- Further the petitioner cannot challenge the Advance Ruling given in the above case.
Therefore, the petitioner prayed for the quashment of the impugned order.
The Department submitted the following before the High Court-
- There are 8 firms engaged in the business of sale of paan having different GST numbers under the brand name Karnawat Pann.
- All the 8 firms re running under the above said brand name.
- The petitioner and other family members are related and connected to Gulab Singh Chauhan.
- All are paying GST at the rate of 1% of the turnover.
- The petitioners and other firms are not only dealing in the purchase and sale of products but also mixing the products for making Gutka and Paan out of these products.
- The advance ruling given in the name of sister concern is binding on the petitioner.
- The Department rightly issued the show cause notice enforcing the advance ruling.
Therefore, the Department contended that the writ petition, filed by the petitioner, is not maintainable.
The High Court considered the submissions of the petitioner and the Department. The High Court found that the advance ruling given to Shri Gulam Singh Chouhan has not been challenged till date. The petitioner got independent GST Registration and has an independent business activity and it is a separate business entity. The High Court, therefore, held that the advance ruling in the case of Shri Gulam Singh Chouhan cannot be applied under Section 103 of the Act. The High Court further held that the proper officer ought to have examined the case independently without relying on the advance ruling given in the case of Shri Gulam Singh Chouhan.
The High Court further analysed the order of the adjudicating authority in the case of petitioner. The High Court observed that the adjudicating authority simply held that the reply is not satisfactory. The Adjudicating Authority is supposed to decide the grounds taken by the petitioner in the reply to the show cause notice. The application of mind should be reflected in the decision-making process as well as in the final order.
The High Court held that it is a fit case for interference. Accordingly, the High Court allowed the writ petition. The High Court remanded the matter to the Adjudicating Authority to decide the matter afresh the show cause notice on merit.