2019 (12) TMI 50 - AAAR - GST

Appellate Authority Overturns Decision Due to Violation of Natural Justice

In Re: M/s. A.M Abdul Rahman Rowther & Co.

In Re: M/s. A.M Abdul Rahman Rowther & Co. - 2020 (32) G.S.T.L. 757 (App. A. A. R. - GST - T. N.) Issues Involved1. Classification of the product 'Chewing Tobacco' and applicability of Notification No.01/2017-Compensation Cess-(Rate).2. Rejection of the application by the Lower Authority under Section 98(2) of the CGST/TNGST Act 2017.3. Alleged violation of principles of natural justice.Detailed AnalysisClassification of the Product 'Chewing Tobacco' and Applicability of Notification No.01/2017-Compensation Cess-(Rate)The appellant, a manufacturer of tobacco products under the brand 'Nizam Lady,' sought an advance ruling on the classification of their product 'Chewing Tobacco' and the applicability of Notification No.01/2017-Compensation Cess-(Rate). The Original Authority for Advance Ruling rejected the application under the first proviso to Section 98(2) of the CGST/TNGST Act 2017, citing that the issue was already pending before the appropriate authority.Rejection of the Application by the Lower Authority under Section 98(2) of the CGST/TNGST Act 2017The Lower Authority rejected the application based on comments from the Commissioner GST & Central Excise, Trichy, which indicated that proceedings related to the appellant's issue had already been initiated and an offense case booked. The appellant argued that their application was accepted initially, and during the personal hearing on 22nd May 2019, the Lower Authority was satisfied that there were no pending issues. However, the application was later rejected due to the pending proceedings.The appellant contended that the rejection was based on the comments received from the CGST officers post-hearing, without giving them an opportunity to respond, which they claimed was contrary to Section 98(2) of the Act.Alleged Violation of Principles of Natural JusticeThe appellant argued that the rejection of their application without a hearing on the matter of pending proceedings violated the principles of natural justice. They claimed that the summons issued by the jurisdictional authority were related to the short payment of GST and GST Compensation Cess and not the classification of the product. They also pointed out that the jurisdictional authority did not raise objections during the personal hearing before the Lower Authority.Personal Hearing and SubmissionsDuring the personal hearing on 10.10.2019 before the Appellate Authority, the appellant's representatives contended that the issue of pending proceedings was not discussed during the hearing before the Lower Authority. They requested the matter be remanded for reconsideration.The appellant submitted that the initiation of inquiry under Section 70 of the CGST Act by the jurisdictional authority was unrelated to the application for advance ruling. They argued that the term 'proceedings' in Section 98(2) is vague and lacks clarity regarding the stage at which a matter is deemed pending. They cited cases where applications were rejected at the admission stage with proper judicial proceedings, which they claimed were not followed in their case.Discussions and RulingThe Appellate Authority considered the submissions and statutory provisions. It found that the Lower Authority had not extended an opportunity to the appellant to comment on the jurisdictional authority's submissions, thus violating the principles of natural justice. The Appellate Authority decided to remand the case to the Lower Authority to extend an opportunity to the appellant and then decide the case as per the provisions of law.Final RulingThe order No. 37/AAR/2019 dated 27.08.2019 passed by the Lower Authority was set aside. The matter was remanded to the Lower Authority for reconsideration and passing of appropriate orders on whether the issue raised in the application by the appellant was already pending before the department, after extending an opportunity to the appellant.