SHOW CAUSE NOTICE CONTRARY TO ADVANCE RULING- VALID?

Advance Ruling

Chapter XVII of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) deals with the procedure of getting advance ruling from the Authority for Advance Ruling by a registered person in respect of questions as contained in Section 97(2) of the Act as detailed below-

• classification of any goods or services or both;
• applicability of a notification issued under the provisions of this Act;
• determination of time and value of supply of goods or services or both;
• admissibility of input tax credit of tax paid or deemed to have been paid;
• determination of the liability to pay tax on any goods or services or both;
• whether applicant is required to be registered;
• 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.

Any person wants to get an advance ruling he shall file an application in the prescribed form before the Authority for Advance Ruling in their jurisdiction. If the said 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 authorised representative as well as to the concerned officer or his authorised representative, pronounce its advance ruling on the question specified in the application.

If the registered person is aggrieved against the Ruling of the Authority for Advance Ruling, may file an appeal before the Appellate Authority for Advance Ruling in their jurisdiction. After hearing the parties to the appeal, the Appellate Authority for Advance Ruling may uphold the ruling given by the Authority for Advance Ruling or may modify the Ruling or set aside the said ruling.

Applicability of advance ruling

Section 103 of the Act provides that the advance ruling pronounced by the Authority or the Appellate 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.

The advance ruling given by the Authority for Advance Ruling or the Appellate Authority for Advance Ruling shall be binding on the applicant and the Department unless the law, facts or circumstances supporting the original advance ruling have changed.

Issue

The issue to be discussed in this article is as to whether a show cause notice can be issued to the registered person by the Department when the Authority for Advance Ruling gave a ruling in favour of the registered person and the validity of such notice with reference to a decided case law.

Case law

In M/s. Amit Engineers Versus Union of India & Ors. - 2026 (5) TMI 1433 - HIMACHAL PRADESH HIGH COURT, the writ petitioner in this case filed an application before the Authority for Advance Ruling on a question on the classification of the ‘Roof Mounted AC Packaging Unit’. The Authority for Advance Ruling gave its rulings as detailed below-

• The classification of the ‘Roof Mounted AC Package Unit’ manufacturers as per the specific design and layout provided by the Railways and supplied to the Indian Railways only and nowhere else falls under Chapter 86.07 of the GST Tariff.
• This ruling is valid subject to the provisions under Section 103(2) of the act until and unless declared void under Section 104(1) of the Act.

The Directorate of Intelligence, Chandigarh issued a show cause notice on 14.02.2025 in which it was directed the writ petitioner to pay the amount as contained in the show cause notice within 30 days from the date of service of the notice under Section 73(8) of the Act. The show cause notice indicated that the said notice shall be deemed to be concluded in terms of Section 73(8) of the Act. At the same time, if the petitioner intended to defend the case, the petitioner was directed to produce, at the time of show cause of the notice, all the evidences in support of his defence and also to indicate whether the wanted to be heard in person before the case is adjudicated. The notice further indicated that in any case no reply is received from the petitioner within 30 days of the receipt of the notice or did not appear in person before the Adjudicating Authority when the case is posted for personal hearing, the case will be decided as ex-parte on the basis of the evidences available on the record.

The petitioner did not file a reply to the said show cause notice. However, he filed the present writ petition before the High Court challenging the said show cause notice. The petitioner contended before the High Court that the impugned show cause notice is not sustainable since the Advance Ruling dated 11.04.2022 issued by the Authority for Advance Ruling which has been accepted by the Department. No appeal has been filed against the Ruling of the Authority for Advance Ruling and thus attained finality between the parties and binding on the parties.

The Department contended that a complete mechanism has been provided in the GST Act and the rules framed there under by filing a reply to the show cause notice. The registered person may file an appeal if the order on the show cause notice is passed against the registered person. Instead of filing a reply the petitioner approached the High Court.

The High Court considered the submissions of the petitioner and the Department. The High Court considered that the Advance Ruling is valid until it was declared void under Section 104(1) of the Act. The Department has neither disputed, nor assailed or questioned the Advance Ruling before any Forum. It is a settled proposition of the law that the Advance Ruling is binding upon the Authorities.

The High Court observed that in normal course, a party is relegated to filing a reply to the show cause notice, with a direction to the concerned Authority to pass an appropriate order in consonance with the law and after taking into consideration the objections raised by the party. In the present case, the High Court held that it is clear that, in view of the finality attached to the Advance Ruling between the parties, the show cause notice dated 14.02.2025 was without foundation. The notice is not sustainable and there is noting to be adjudicated with respect to Advance Ruling.

The High Court set aside the impugned show cause notice and allowed the writ petition.