AAAR remands GST exemption case for educational services under Entry 66 of Notification 12/2017 citing natural justice violations

The AAAR Gujarat allowed an appeal by remanding the case to the GAAR for fresh decision. The appellant sought GST exemption for educational services provided in affiliation with Gujarat University under Entry No.66 of Notification No.12/2017-Central Tax (Rate). The GAAR failed to pass any order on the application. The appellant raised an additional plea before AAAR regarding exemption under Entry No.3 of the same notification, which was never raised before GAAR. The AAAR found that principles of natural justice were not followed and remanded the matter to GAAR for fresh consideration of all aspects with adequate hearing opportunity.

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Issues Involved: Withdrawal of application, principles of natural justice, rectification of mistake, exemption under Entry No. 66 and Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

Issue-wise Detailed Analysis:

1. Withdrawal of Application:
The appellant contended that the Gujarat Authority for Advance Ruling (GAAR) did not consider their withdrawal application dated 25.08.2020. The appellant had informed GAAR via email on 24.08.2020 and submitted a hard copy on 25.08.2020, expressing their willingness to withdraw their application for advance ruling. Despite this, GAAR proceeded to pass an order on 17.09.2020 without addressing the withdrawal request, which the appellant received on 03.10.2020.

2. Principles of Natural Justice:
The appellant argued that GAAR failed to follow the principles of natural justice by passing the order without providing them an opportunity to be heard on merits. The appellant highlighted that the order was issued without considering their withdrawal application and without a proper hearing, thereby violating the principles of natural justice.

3. Rectification of Mistake:
The appellant submitted an application dated 09.10.2020 for rectification of the order passed by GAAR, citing Section 102 of the CGST Act, 2017, which allows for rectification of any error apparent on the face of the record within six months from the date of the order. However, GAAR did not pass any order on this rectification application, further contributing to the appellant's grievances.

4. Exemption under Entry No. 66 and Entry No. 3 of Notification No. 12/2017-Central Tax (Rate):
The appellant's primary contention was that their services, provided in affiliation with Gujarat University, should be exempt from GST under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate). GAAR had ruled that the appellant did not qualify as an educational institution and thus was not entitled to the exemption. Additionally, the appellant raised an alternative argument that their services should be covered by Entry No. 3 of the same notification, a point raised for the first time before the appellate authority.

Findings and Conclusion:
The appellate authority found merit in the appellant's arguments regarding the violation of principles of natural justice and the failure to address the withdrawal and rectification applications. The authority emphasized the need for proper inquiry and adherence to natural justice, citing relevant judgments from the High Court of Bombay and the High Court of Gujarat, as well as a CESTAT ruling, which support the remand of cases for fresh adjudication when procedural lapses occur.

Remand Order:
In light of the procedural lapses and the need for a thorough examination of all aspects, the appellate authority remanded the case back to GAAR for a fresh decision. GAAR is directed to consider the appellant's withdrawal application, provide adequate opportunity for a hearing, and issue a new ruling after addressing all relevant issues, including the exemption claims under both Entry No. 66 and Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

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