2025 (9) TMI 862 - HC - GST

Writ allowed: adjudicating authority's nonspeaking SCN set aside; matter remanded for fresh, reasoned decision on composition eligibility

Mahendra Singh Versus Assistant Commissioner State Tax And Others

HC allowed the writ petition, finding the adjudicating authority's SCN order nonspeaking for merely rejecting the petitioner's reply as 'not satisfactory' ... Challenge to SCN issued u/s 74 of the Goods and Services Tax Act, 2017 - business model would be selling Pan Masala, tobacco products, etc - eligibility for the composition scheme u/s 10 of CGST/SGST - Applicability of advance ruling against the assessee (on application of the proprietor of Group) which was not challenged - HELD THAT:- From the perusal of the final order, it is apparent that after recording the reply given by the petitioner, the authority has simply held that 'same is not satisfactory'. The adjudication authority is supposed to decide the grounds taken by the petitioner in the reply of SCN. The application of mind should be reflected in the decision-making process as well as in the final order. In the absence of appreciation of facts and grounds in the nonspeaking order, the petitioner cannot be relegated to the appellate authority for filing an appeal. Thus, it is a fit case for interference in the writ petition. Accordingly, this Writ Petition stands allowed. The matter is remanded back to the respondent, i.e., the Assistant Commissioner of State Tax, Indore Circle-I, to decide afresh the SCN on merit independently without being influenced by advance ruling. Petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an advance ruling given under Section 98 of the CGST/MPGST Act is binding on taxpayers other than the applicant, particularly where multiple distinct GST registrations operate under a common brand or family control. 2. Whether a show cause notice and subsequent adjudication under Section 74 read with relevant penal and procedural provisions can validly rely on an advance ruling against a different person without independent adjudication of the noticee's individual facts. 3. Whether a final adjudication order that fails to record application of mind to the specific grounds raised in reply and is otherwise non-speaking can be interfered with by writ jurisdiction under Article 226 and, if so, the appropriate remedial course. ISSUE-WISE DETAILED ANALYSIS Issue 1: Binding Effect of an Advance Ruling on Persons Other Than the Applicant Legal framework: The advance ruling mechanism under Section 98 of the CGST/MPGST Act provides authoritative determinations for the applicant; Section 103 prescribes the binding effect of an advance ruling. Precedent Treatment: No earlier judicial precedents are invoked or relied upon in the judgment; the Court proceeds on statutory interpretation and factual matrix. Interpretation and reasoning: The Court emphasises the statutory limit of applicability: an advance ruling is binding only on the person who sought it. While factual circumstances showed multiple firms operating under the same brand and family connections, the petitioner held an independent PAN and independent GST registration. The tribunal/authority, before invoking an advance ruling against the petitioner, was obliged to examine whether the statutory binding scope (Section 103) extended to the petitioner on the facts - e.g., whether the distinct registration notwithstanding common brand resulted in legal identity sufficient to attract the ruling against him. Ratio vs. Obiter: Ratio - an advance ruling is not automatically binding on other distinct persons; the statutory limitation in Section 103 must be respected and applied factually. Obiter - observations about the existence of common brand or family operation are factual findings relevant to remand but do not expand the binding scope of an advance ruling. Conclusions: The advance ruling issued to another person cannot be mechanically applied to the petitioner. The adjudicating authority must independently examine whether circumstances justify treating the petitioner as covered by the ruling; absent such independent analysis, reliance on the ruling is impermissible. Issue 2: Reliance on an Advance Ruling in Adjudication of a Show Cause Notice Under Section 74 Legal framework: Adjudication on a show cause notice under Section 74 (penalty/tax demand) requires assessment of facts and application of law to the noticee's specific case. The authority must consider replies to the SCN and address the grounds raised. The advance ruling regime (Sections 98 and 103) governs how prior rulings affect later adjudications. Precedent Treatment: No direct precedential authorities considered; the Court applies statutory duties of adjudicatory officers and principles of reasoned orders. Interpretation and reasoning: The Court finds the adjudicating authority issued a show cause notice and passed a final order that replicated the prior advance ruling's outcome without independent consideration of the petitioner's replies. The authority recorded the petitioner's reply as 'not satisfactory' but did not articulate why specific defenses or factual assertions were rejected. Where multiple firms share a brand and family connections, the authority's reliance on an advance ruling against one person to adjudicate another requires explicit reasoning demonstrating legal and factual equivalence; mere brand/common operation averments in the departmental case file do not suffice to displace the statutory limit on an advance ruling's binding force. Ratio vs. Obiter: Ratio - an adjudicating authority cannot validly enforce an advance ruling against a different person without independent adjudication and recorded application of mind addressing the noticee's specific grounds. Obiter - factual commentary on group operation and common brand status is relevant to factual inquiry but not determinative without reasoned findings. Conclusions: Reliance on an advance ruling given to another without addressing the noticee's distinct legal identity and factual replies renders adjudication unsatisfactory and unlawful; the proper course is fresh adjudication considering whether the advance ruling legitimately applies to the noticee. Issue 3: Validity of Non-Speaking Orders and Maintainability of Writ Relief Legal framework: Administrative law principles require adjudicatory orders to be speaking orders showing application of mind, dealing with grounds and evidence on record. Writ jurisdiction under Article 226 is available to examine jurisdictional errors, breaches of natural justice, or non-application of mind in statutory adjudications. Precedent Treatment: The judgment does not cite prior decisions but applies established principles requiring reasoned records in adjudicatory orders. Interpretation and reasoning: The final order reproduced indicated only that the reply was 'not satisfactory' and proceeded to issue DRC-07 and impose tax, penalty, and interest. The Court found that the adjudication authority failed to record reasons rejecting the specific defenses raised, thus producing a non-speaking order. The absence of factual appreciation and reasoned rejection prevents meaningful appellate review and offends principles of reasoned decision-making. Given these jurisdictional defects, the writ petition challenging the show cause notice and ensuing order is maintainable to secure proper adjudication rather than to substitute findings on merits. Ratio vs. Obiter: Ratio - where an adjudicatory order is non-speaking and shows no application of mind to specific grounds raised by the noticee, the order is amenable to interference in writ jurisdiction and remand for fresh adjudication. Obiter - remarks on the necessity of appellate recourse versus remand are pragmatic but not dispositive of the core principle. Conclusions: Writ relief is appropriate to set aside a non-speaking order and remand the matter for fresh adjudication. The adjudicating authority must consider the reply, address each material contention, and render a reasoned order reflecting application of mind; mere reliance on a prior advance ruling absent such reasoning is insufficient. Remedial Disposition and Directions Interpretation and reasoning: In light of identified defects - improper transposition of an advance ruling to a distinct GST registrant and a non-speaking final order - the appropriate remedy is to quash the impugned order and remit the matter to the adjudicating authority for fresh adjudication on merits without being influenced by the prior advance ruling. Ratio vs. Obiter: Ratio - remand for fresh, reasoned adjudication is the proper remedy where the authority failed to apply mind and relied improperly on an advance ruling applicable to a different person. Obiter - any observations addressing factual indicia of group operation or brand commonality are left for the adjudicating authority to consider on remand. Conclusions: The matter is remitted to the adjudicating authority to decide the SCN afresh on merits, independently and after addressing the petitioner's specific replies and factual assertions; the authority must not be influenced by the earlier advance ruling unless cogent, reasoned findings establish its applicability to the petitioner.