2025 (8) TMI 1119 - AAR - GST

AAR dismisses advance ruling application as inadmissible under Section 97(2) CGST Act for internal accounting error

AAR held the applicant's advance ruling application inadmissible and dismissed it for falling outside the scope of Section 97(2) CGST Act. The dispute ... Scope of Advance Ruling application - Adjustment of ITC credit in the books of accounts, outstanding payable amount - erroneous transfer of ITC is eligible for refund or not - HELD THAT:- It is found that the possibility of categorizing the query, if any, lies only with clause (d) of Section 97(2) of the CGST Act, 2017, which reads as “(d) admissibility of input tax credit of tax paid or deemed to have been paid”. It is noted that the instant case is about an error reported to have been committed by the applicant, and it only relates to payment of taxes under GST, albeit inadvertently, which in our opinion could have been corrected by the applicant themselves through the annual returns to be filed by them while finalising the financials/accounts at the end of the respective financial year. Notwithstanding the same, it involves internal adjustment of accounts between the applicant and the supplier involved, viz., M/s. PPG Asian Paints Ltd., as admitted by the applicant themselves in the application filed. Under the facts and circumstances of the case, the applicant’s request to issue a directive to M/s. PPG Asian Paints Ltd., who is the supplier in the instant case, is outside the scope of this Authority for Advance Ruling. This is due to the fact that as per Section 95(a) of the CGST Act, 2017, which defines “advance ruling”, it gets conveyed that a ruling is to be provided in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant, and not for any other person/entity. It is found that though the query contains the term ‘ITC Credit’, the subject matter does not relate to Input Tax Credit (ITC) or the admissibility of the same, by any means whatsoever. It is convincing that the aforesaid query does not fit into any of the clauses under Section 97(2) of the Act, ibid, including clause (d) as referred above. Accordingly, the application for advance ruling filed by the applicant in the instant case is not liable for admission, as both the queries raised therein, fall outside the purview of Section 97(2) of the Act. The application for advance ruling filed by the applicant is not admitted, as the questions put forth by the applicant does not fall under any of the clauses from (a) to (g) of Section 97(2) of CGST/TNGST Acts, 2017. ISSUES PRESENTED AND CONSIDERED 1. Whether the questions posed by the applicant fall within the scope of matters on which an advance ruling may be pronounced under Section 97(2) of the Act (clauses (a)-(g)). 2. Whether a ruling can be issued directing a supplier (a person other than the applicant) to transfer/adjust outstanding Input Tax Credit (ITC) to the applicant's account where the applicant contends purchase invoices were erroneously reported as outward supplies and outward tax was paid. 3. Whether 'ITC erroneously transferred' is a question admissible for advance ruling, including whether such erroneously transferred ITC is eligible for refund (i.e., whether the query concerns the admissibility of ITC or refund entitlement under the Act). ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of questions under Section 97(2) - whether the application falls within clauses (a)-(g). Legal framework: Section 97(2) enumerates the categories of questions on which an advance ruling may be sought - classification, applicability of notifications, determination of time and value of supply, admissibility of ITC, determination of liability to pay tax, requirement to be registered, and whether a particular act amounts to a supply. Precedent treatment: Applicant cited rulings of a different Advance Ruling Authority to support book-adjustment approaches to ITC; however, the Authority examined statutory scope rather than adopting those precedents for admissibility. Interpretation and reasoning: The Authority analyzed the actual substance of the queries against the statutory list. The second query (eligibility for refund of erroneously transferred ITC) was found not to correspond to any clause in Section 97(2) and thus not admissible. The first query, as framed, was unclear on facts but, when interpreted in light of the statement of facts and oral submissions, effectively sought relief involving inter-party adjustment and a directive to the supplier. The Authority held that the questions, as posed, do not clearly engage the listed categories and do not present a pure question on classification, notification applicability, time/value, admissibility of ITC in the direct sense contemplated by clause (d), liability determination, registration, or supply characterization. Ratio vs. Obiter: Ratio - an advance ruling is admissible only when the question squarely falls within Section 97(2); the application's queries did not meet that statutory requirement. Obiter - observations that the applicant could have corrected errors through annual returns are ancillary but indicate alternative remedies. Conclusion: Both queries fall outside the ambit of Section 97(2); the application is not admissible for an advance ruling on those questions. Issue 2: Whether the Authority can direct a third party (supplier) to effect ITC transmission/adjustment - scope of advance ruling and identity of the applicant. Legal framework: Section 95(a) defines 'advance ruling' as a determination in relation to supplies being undertaken or proposed to be undertaken by the applicant. Section 103 sets binding effect of rulings as limited to the applicant and the concerned officer. Precedent treatment: Applicant relied on decisions permitting book adjustments; the Authority did not adopt those authorities to expand the remedial power to direct third parties and instead relied on statutory limits of advance ruling jurisdiction. Interpretation and reasoning: The Authority emphasized that an advance ruling may be provided only in relation to matters concerning the applicant's own supplies or tax liability. The relief sought - a directive to the supplier to transfer ITC in its books - would, if given, be a ruling in relation to the supplier's records/actions rather than the applicant's conduct. Such relief is beyond the Authority's statutory competence because an advance ruling cannot be issued 'in respect of any other person/entity.' The Authority also noted that the factual matrix involved internal commercial adjustments between parties, which are not the type of determinations contemplated for advance rulings. Ratio vs. Obiter: Ratio - the Authority lacks jurisdiction to issue directives affecting the rights/obligations of third parties by way of advance ruling; advance rulings relate to the applicant alone. Obiter - comments on internal account adjustments and alternative correction mechanisms. Conclusion: The requested directive to the supplier is outside the scope of the Authority's power to issue an advance ruling and therefore cannot be granted. Issue 3: Whether the substance of the dispute involves admissibility of ITC (clause (d)) or refund entitlement and thereby falls within Section 97(2). Legal framework: Clause (d) of Section 97(2) permits advance rulings on 'admissibility of input tax credit of tax paid or deemed to have been paid.' Questions about refund eligibility are not specifically enumerated in the clause list. Precedent treatment: Applicant cited decisions where book adjustments were allowed to preserve ITC; the Authority treated those citations as not determinative of admissibility in the present factual posture. Interpretation and reasoning: The Authority examined whether the applicant's query truly concerned admissibility of ITC under the statutory tests, or whether it involved rectification of reporting errors and inter-party book adjustments. It concluded that, despite the term 'ITC' appearing in the query, the matter fundamentally concerned prior reporting errors and requested corrective action by the supplier rather than a ruling on statutory entitlement to credit. The second query about refund eligibility was explicitly held not to fall within Section 97(2). The Authority observed that the applicant could rectify returns/annual statements and that the matter involved internal adjustments rather than a question of statutory admissibility proven on the record before the Authority. Ratio vs. Obiter: Ratio - mere invocation of 'ITC' does not automatically render a question admissible under clause (d); the advance ruling must concern admissibility as a legal question applicable to the applicant. Obiter - suggestion that errors could be corrected in annual returns is an alternative remedial observation, not foundational to the ruling. Conclusion: The disputes raised do not constitute a genuine question of admissibility of ITC or refund entitlement under Section 97(2); therefore clause (d) does not rescue admissibility. Cross-references and ancillary findings - The Authority noted that no pending proceedings were reported by jurisdictional officers and no remarks were received from the Central Authority; this factual context was considered but did not alter the statutory admissibility analysis. - The Authority reiterated statutory constraints: an advance ruling is binding only on the applicant and the concerned officer and may be set aside if obtained by fraud or suppression; these constraints underscore why the Authority cannot pronounce on issues pertaining solely to another person. Final Conclusion The application for advance ruling is not admitted because the questions posed do not fall under any clause of Section 97(2) of the Act; in particular, (i) the query seeking a directive to the supplier is outside the Authority's jurisdiction as advance rulings apply only to the applicant's matters, and (ii) the query on refund of 'erroneously transferred ITC' is not a matter within the enumerated categories for an advance ruling.