AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 1247
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....egality and propriety of Order No. 02/Odisha- AAAR/Appeal/2021-22, dated 27.07.2021 passed in Appeal bearing No. 01/Odisha-AAAR/Appeal/2021-22 by the Odisha Appellate Authority for Advance Ruling ("AAAR" for short) constituted under Section 99 of the Odisha Goods and Services Tax Act/the Central Goods and Services Tax Act, 2017 (collectively abbreviated as "GST Act"), whereby the ruling rendered by Odisha Authority for Advance Ruling ("AAR", for brevity) constituted under Section 96 vide Order No. 06/Odisha- AAR/2020-21 dated 09.03.2021 in consideration of the Application filed under Section 97 of the GST Act has been set aside in the appeal preferred by the Jurisdictional Officer and held that "the items sold by the applicant-M/s. Pioneer Bakers will attract the GST tariff rate as individual items". 1.1. It is alleged that the Appellate Order has been passed in gross violation of the established position of law and suffers from procedural irregularities warranting interference being in violation of principles of natural justice. FACTS AS NARRATED BY THE PETITIONER: 2. The Petitioner-firm is operating its outlets under the name of "GO-COOL" since 1997. It has established i....
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....pect to chocolates, various chocolates are displayed in a display freezer with name tags giving details of the ingredients and the customer has the option to select the same. After the item is selected, it is heated or served in different forms such as, brownies to the customer. A customer has the option of taking away the same in different customised containers. Certain customers after selecting different varieties of chocolates ask for special packaging in different shaped containers, which is also a form of service provided by the petitioner. The chocolates prepared in the workshop are also used in the preparation of brownies, smoothies, shakes and other beverages, etc. prepared in the outlets itself and the customer is normally served with various dishes of hot chocolates in the premises. 2.7. The customer has also the option to choose a suitable beverage from a whole lot of options or to ask for a custom drink (non-alcoholic), which is prepared instantly in the outlets on demand. Different customers have different tastes and as per their demand various drinks are prepared in the outlets. 2.8. The facilities provided in the outlets coupled with the ambience make it a perf....
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....d to the customers from the counter with the facility to consume the same in the air-conditioned premises itself covered under the restaurant services? Ans: Yes, answer is in the affirmative. Q.(b) Whether supply of items such as birthday stickers, candles, birthday caps, snow sprays etc. related items which are essentially used in birthday celebration can be classified as Composite Supply defined under Section 2 (30) of the CGST Act, 2017 and Section 2 (30) of the OGST Act, 2017 wherein the Principal supply of goods consists of bakery items, chocolates while the supply of services include the supply of air conditioned place to sit and to celebrate birthday. Ans: The answer is in the 'Negative'. Q.(c) Whether the sale of handmade chocolates which are manufactured in the workshop of the Applicant and are utilised for the purpose of providing other services such as shakes, brownies and are also retailed by packing in different containers as per the choice of the customer will be covered under the under the restaurant services? Ans: Yes, answer is in the affirmative. Q.(d) What is the nature and rate of tax applicable to the follow....
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....ner that upon hearing, relying on the version of the Jurisdictional Officer that the petitioner is running a bakery business where different items are sold on take away basis, the AAAR overturned the ruling of the AAR and observed as follows vide Order dated 27.07.2021 in Appeal bearing No. 01/Odisha- AAAR/Appeal/2021-22,: "Most of the items are not prepared in their premises. The serving of the items to the customer for taking the food in the premises is done to very few customers. Therefore, the establishment running by the applicant M/s. Pioneer Bakers cannot be considered as Restaurant. The concerned Officer, Deputy Commissioner, CT & GST, Odisha also put forth their submissions on the similar grounds. The Concerned Officer submitted that, in the instant case it is a bakery outlets where ready to each (sic. eat) items are sold and mere facility is provided to take it from the shop. The applicant has only prepared birthday cakes, as per order for take out service and they do not prepare birthday cakes immediately from the customers order. Those who want to take within the premises, they merely supply the readily available cakes. They do not serve food to the Customer ta....
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....ing of the items to the customer for taking the food in the premises is done to a very few customers only as it is done usually by any of normal bakery. However, serving a very few items in the manner done by a bakery does not make the establishment of the petitioner a restaurant". 6.2. Drawing distinction between "restaurant" and "bakery" business, it is contended that whereas cooking and serving full/complete cooked meals give the essential character to a restaurant service, in case of bakery, selling only baked items on take away basis gives the essential character to a bakery. Further, in case of restaurant, full and complete meals are cooked and served and the kitchen is situated in the premises of the restaurant itself, because the essential character of a restaurant is serving hot cooked full meals. However, in case of bakery the existence of kitchen in the same premises is not essential. It is also not a requirement for the bakery to serve baked items in the same premises. The main purpose of bakery is only to sell its baked items rather than serving them to customers in its premises. 7. Refuting such contention of the opposite parties the petitioner filed rejoinder a....
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....ted as nullity. It is submitted that during the course of hearing before the AAAR material particulars were submitted along with apposite explanation with respect to activity of the business of the petitioner. Even so, the AAAR without appreciating the nature of business and transactions of the petitioner, it reversed the finding of the AAR. 9.1. After receipt of copy of the Order dated 27.07.2021, it could come to light that the AAAR proceeded on the basis of untested material forming part of the report and "verification put forth by the Jurisdictional Officer and the Concerned Officer". 9.2. Sri Jagabandhu Sahoo, learned Senior Advocate vehemently argued that as the contents of the report formed the basis for varying with the opinion of the AAR in the appeal, the petitioner on 03.08.2021 made an application for supply of copy of said report. Since copy of the report was not supplied to the petitioner, reminders were submitted on 12.08.2021 and 31.08.2021. By way of Letter C.No.IV(023)/AAR/ Pioneer/SBP-I/2021/1457, dated 03.09.2021, the Assistant Commissioner, GST and Central Excise, Sambalpur-I Division denied to supply copy of the report. The text of said letter reads as f....
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....follows: "*** B. Weekend shutdown In the interest of public health and containment of spread of Covid-19 in the State, weekend shutdown on Saturday and Sunday shall be imposed in all Urban areas of the State w.e.f. 9PM of 24.04.2021. During the weekend shutdown all activities shall be closed except the following: *** Dhabas along National and State Highways/ Major roads for takeaway only. *** F. Commercial 1. Haats and Markets including fish markets shall be decentralized and allowed to operate with minimum 30 feet distance from shop to shop. The shopkeepers and the buyers shall mandatorily abide by the Covid safety protocols like social distancing, use of mask. The local authorities shall demarcate areas for this purpose. Any violation of COVID-19 protocols will attract closure/sealing/cancellation of license of the concerned shops. 2. Malls shall operate with reduced number of customers. The mall Owner shall ensure that persons entering malls are thoroughly screened for temperature, correct use of masks and physical distancing. No food court shall be open for seat- in dining.....
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....ance of Covid-19 protocols. However, hotels/restaurants can serve take away food to customers/buyers/ clients. Further the hotels/restaurants can take on-line orders and deliver take away food to the customers. 10. No Street Food Vendors shall serve food to consumers at the venue. They can, however, serve take away food to customers/buyers/clients. While clients/consumers/buyers come to such units for ordering take away food, the food stall/joint owner shall ensure compliance of all Covid-19 protocols. Any deviation/non-compliance shall entail criminal action and penalty as per law and may make such unit liable for sealing/closure and suspension/ cancellation of trade license and levy of penalty. *** K. Penal provisions Any person violating these measures will be liable to be proceeded against in accordance with the provisions of Section 51 to 60 of the Disaster Management Act, 2005, the Epidemic Diseases Act, 1897 and Regulations issued thereunder besides legal action under Section 188 of the IPC and other legal provisions as applicable." 9.6. Taking cue from aforesaid guidelines the learned Senior Counsel appearing for the petitioner submitt....
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....fined in Notification No. 11/2017-Central Tax (Rate) and attract 5% GST [without ITC]." Therefore, the learned Senior Counsel submitted that the perception of the Appellate Authority based on dictionary meaning is unwarranted and uncalled for. 9.8. Sri Jagabandhu Sahoo, learned Senior Counsel expanding the submission further urged that in order to examine whether the supply of goods and services by the petitioner would fall within the expression employed in appropriate notification relating to rate of GST, the AAAR laid much stress on dictionary meaning, which is impermissible in law. It is trite that where no definition is provided in the statute itself, as in this case, for ascertaining the correct meaning of a fiscal entry reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. In this connection reference may be made to the observations in CST Vrs. S.N. Brothers, Kanpur, (1973) 3 SCC 496 = AIR 1973 SC 78. 9.9. Sri Jagabandhu Sahoo, learned Senior Advocate, therefore, contended that had there been proper opportunity afforded to the petitioner by confronting the adverse report, which was relied on ....
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.... 12.1. The principles of natural justice are those rules which have been laid down by the Courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial or quasi-judicial authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice. Law is well-settled that in the applicability of the doctrine of natural justice there can be no distinction between the quasi-judicial function and an administrative function inasmuch as the aim of both is to arrive at a just decision and to prevent miscarriage of justice. 12.2. The case of Smt. Maneka Gandhi Vrs. Union of India, reported in (1978) 1 SCC 248, is noteworthy for reference as embodiment of principles of natural justice. The following has been laid down therein: "9. We may commence the discussion of this question with a few general observations to emphasise the increasing importance of natural justice in the field of administrative law. Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the years it has grown into a widely....
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....us, the soul of natural justice is 'fair-play in action' and that is why it has received the widest recognition throughout the democratic world. In the United States, the right to an administrative hearing is regarded as essential requirement of fundamental fairness. And in England too it has been held that 'fair-play in action' demands that before any prejudicial or adverse action is taken against a person, he must be given an opportunity to be heard. The rule was stated by Lord Denning, MR in these terms in Schmidt Vrs. Secretary of State or Home Affairs, (1969) 2 Ch D 149 = (1969) 1 All ER 904-'where a public officer has power to deprive a person of his liberty or his property, the general principle is that it has not to be done without his being given an opportunity of being heard and of making representations on his own behalf'. The same rule also prevails in other Commonwealth countries like Canada, Australia and New Zealand. It has even gained access to the United Nations (vide American Journal of International Law, Vol. 67, p. 479). Magarry, J., describes natural justice 'as a distillate of due process of law' (vide Fontaine Vrs. Chastarton, (1968) 112 Solicitor General 690....
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....f natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of the case." This view was reiterated and re-affirmed in a subsequent decision of this Court in D.F.O., South Kheri Vrs. Ram Sanehi Singh, (1971) 3 SCC 864 = AIR 1973 SC 205. The law must, therefore, now be taken to be well settled that even in an administrative proceeding, which involves civil consequences, the doctrine of natural justice must be held to be applicable." 12.4. In the case of Biecco Lawrie Limited Vrs. State of West Bengal, reported in (2009) 10 SCC 32, it has been held as follows: "Principle of natural justice is attracted whenever a person suffers a civil consequence or a prejudice is caused to him by an administra....
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....ven by this Court to the concept of equality which is the subject-matter of that article. Shortly put, the syllogism runs thus: violation of a rule of natural justice results in arbitrariness which is the same as discrimination; where discrimination is the result of State action, it is a violation of Article 14: therefore, a violation of a principle of natural justice by a State action is a violation of Article 14. Article 14, however, is not the sole repository of the principles of natural justice. What it does is to guarantee that any law or State action violating them will be struck down. The principles of natural justice, however, apply not only to legislation and State action but also where any tribunal, authority or body of men, not coming within the definition of State in Article 12, is charged with the duty of deciding a matter. In such a case, the principles of natural justice require that it must decide such matter fairly and impartially. 96. The rule of natural justice with which we are concerned in these appeals and writ petitions, namely, the audi alteram partem rule, in its fullest amplitude means that a person against whom an order to his prejudice may be pa....
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....in the concept of ordered liberty and, therefore, implicit in every decision-making function, call it judicial, quasi-judicial or administrative. Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner, natural justice will have to be observed in that manner and in no other. No wider right than that provided by statute can be claimed nor can the right be narrowed. Where the statute is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice. The implication of natural justice being presumptive it may be excluded by express words of statute or by necessary intendment. Where the conflict is between the public interest and the private interest, the presumption must necessarily be weak and may, therefore, be readily displaced. ***" 45. Thus, ordinarily, Courts interpret statutory provisions in sync with the aforesaid principles of natural justice on a premise that no statutory authority would violate the fundamental rights enshrined in the Constitution. When it comes to authorities that are....
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....essment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it.' 11. The Hon'ble Supreme Court in State of Kerala Vrs. K.T. Shaduli Yusuff, (1977) 39 STC 478 held as under: "*** The tax proceedings are no doubt quasi-judicial proceedings and the sales tax authorities are not bound strictly by the rules of evidence, nevertheless the authorities must base their order on materials which are known to the assessee and after he is given a chance to rebut the same. ***" 12. In Kishinchand Chellaram Vrs. Commissioner of Income-tax, Bombay City-II, (1980) 125 ITR 713, the Hon'ble Supreme Court held that it was true that proceedings under the income-tax law were not governed by the strict rules of evidence, and, therefore, it might be said that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence. But before the Income- tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert....
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.... assessing authority is entitled to collect the materials behind the back of the assessee. It is not necessary that all the materials so collected by the assessing authority need be confronted to the assessee. Only those materials which the assessing authority intends to utilize against the assessee during assessment are bound to be disclosed to the assessee. 18. Considering the facts and circumstances of the case as well as the decisions of the Hon'ble Supreme Court and this Court, we are of the considered opinion that a dealer is entitled to be supplied with the materials intended to be used against him in the assessment proceeding for rebuttal and the dealer's explanation with regard to those materials is bound to be considered by the assessing officer in the assessment order either accepting or rejecting the same." 13.1. It may be of significance to refer to the following observations made by this Court in Ram Chandra Maikap Vrs. State of Odisha, 1972 (2) CWR 1913: "It is well settled that rules of natural justice are not embodied rules. The requirements of natural justice would vary according to the facts and circumstances of each case. In a Full Bench dec....
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....ssessment proceeding against the dealer is not the report per se but the materials forming the foundation for the report. What the dealer is entitled to know are those materials which are sought to be utilised against him in the assessment proceeding, and nothing beyond it. The inferences of the Inspector are not determinative. Action is taken by the assessing officer on the basis of those inferences to proceed against the dealer, if he is prima facie satisfied about correctness of the inferences." 13.3. In yet another case this Court in Ferro Alloys Corporation Ltd. Vrs. State of Odisha, 77 (1994) CLT 248, observed that: "5. So far as examination of the Sales-tax Officer, Intelligence is concerned, we find no reason to accept the prayer. It is seen from the records that the assessing officer has himself indicated by letter dated 09.09.1993, that due and proper opportunity is being granted to the assessee, and the materials on which the Revenue places reliance shall be brought to the notice of the assessee, before its utilisation. It is trite law that where a material is sought to be utilised against an assessee, adequate opportunity has to be granted to it to rebut the....
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....a Glue Factory Vrs. Sales-tax Tribunal, (1987) 66 STC 292, utilisation of statement/material collected behind back of assessee without opportunity to explain the same is illicit. In that case the appeal was allowed solely on the ground that the statement of a person which was not tested by cross-examination was used in order to reach a conclusion adverse to the assessee. In case an assessing officer proposes to use against the assessee the result of any private enquiry made he should communicate to the assessee all relevant details of any information obtained during enquiry to put the assessee in possession of full particulars of the case it is expected to meet and should further give it sufficient opportunity to meet the case. Such opportunity would also include the acceptance of a prayer to summon a person whose statements/ documents/ accounts are sought to be relied upon. If the prayer is not accepted the use of concerned material would be contrary to law. 7. Rules of natural justice do require that normally speaking if the previous statement of a person is intended to be used as evidence against a party, it must be made available to the party against whom it is intende....
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....ive of whether or not they caused prejudice to the assessee. The assessee was entitled to a fair procedure whether or not they had a case on the merits. The rules of natural justice require that all material on which the department places reliance is made available to the affected party. Vide, Krishna & Co. Vrs. State of Karnataka, (2001) 124 STC 423 (Kar). 13.6. Vide Kalra Glue Factory Vrs. Sales Tax Tribunal, (1987) 66 STC 292 (SC) it is made clear that statement not tested by cross-examination relied upon for finding that transaction amounted to inter-State sale basing on which Tribunal reached its conclusion was set aside and matter was remanded for fresh disposal. 13.7. In Raghubar Mandal Harihar Mandal Vrs. State of Bihar, (1957) 8 STC 770 (SC) = (1958) 1 SCR 37 = (1957) INSC 52, it has been succinctly discussed as follows: "The decision of the Lahore High Court in Seth Gurmukh Singh Vrs. Commissioner of Income-tax, Punjab, (1944) 12 ITR 393 was specifically approved by this Court in Dhakeswari Cotton Mills' case, (1955) 1 SCR 941. The rules laid down in that decision were these: (1) While proceeding under sub-section (3) of Section 23 of the Income-ta....
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....able. The fact that such material is being confronted to the assessee is sufficient to put him to notice in an appropriate way and then would arise his obligation to place materials before the assessing officer with a view to disabusing his mind, if possible, as indicated in the Lahore case [Seth Gurmukh Singh Vrs. Commissioner of Income-tax, Punjab, (1944) 12 ITR 393]. We are not prepared to accept that there is any obligation on the assessing officer to put the assessee to notice that he is going to utilise the adverse material against him." 13.9. On examination of contention of learned Senior Advocate appearing for the petitioner and taking note of concession made by the learned Senior Standing Counsel defending the order of the AAAR, it is found that the Order dated 27.07.2021, which is sought to be set aside invoking extraordinary jurisdiction under Article 226/227 of the Constitution of India for want of confrontation, as one of the facets of the principles of natural justice, does not transpire that the AAAR has disclosed the material contained in the report submitted by the Superintendent of CGST & Central Excise, Sambalpur-I Range to the Assistant Commissioner, CGST & C....
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....ished to the Assistant Commissioner-Jurisdictional Officer, at whose behest the appeal was preferred, after ruling had been rendered by the AAR. 14.2. It appears from the Order dated 27.07.2021 at Annexure-8 that the appeal bearing No. 01/Odisha- AAAR/2021-22 was filed on 28.04.2021 against the Advance Ruling No. 06/ODISHA-AAR/2020-21, dated 09.03.2021. Said Order does not speak about confrontation of contents of the report to the petitioner, which fact has been fairly conceded by Sri Radheyshyam Chimanka, learned Senior Standing Counsel, CGST & Central Excise during the course of hearing on query of this Court. 14.3. Regard can be had to Circular bearing No. 164/20/2021-GST [CBIC-190354/207/2021-TO (TRU-11)-CBEC], dated 06.10.2021 issued by Government of India, Ministry of Finance, Department of Revenue (Tax Research Unit) wherein clarification has been issued with respect to "restaurant service". The AAAR had no occasion to deal with such clarification as the same was not existing on 27.07.2021, i.e., the date of passing appellate order. 14.4. It may also be pertinent to take cognizance of Notifications No. 18491-FIN-CT1-TAX-0002/2020 [SRO 138/2020], dated 22.06.2020 alo....
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....that it is not proper that inconsistent finding should be recorded by different statutory authorities, i.e., finding of AAR vis-à-vis finding of officials who conducted inspection of the business premise of the petitioner, which was heavily relied on by the AAAR for substituting view of the AAR. Under such eventuality, the petitioner should have been afforded proper and reasonable opportunity to meet the material sought to be utilized while rendering ruling in the appeal and such opportunity to the petitioner to state his case should be real, but not pretence. 15.1. In this regard Section 101 of the GST Act, which deals with "Orders of Appellate Authority", in sub-section (1) mandates that "the Appellate Authority may, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to". Therefore, any conclusion arrived without reference to reliable, cogent and admissible evidence cannot be termed to be a decision arrived on facts. Even the language of the Section 101 of the GST Act employing the expression "as it thinks fit", must necessarily be understood....
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....ed to be confronted to the petitioner by the AAAR. In absence of such a course being adhered to, the Order dated 27.07.2021 passed by the AAAR in appeal bearing No., No. 01/Odisha-AAAR/2021-22 against Advance Ruling No. 06/ODISHA-AAR/2020-21, dated 09.03.2021 is rendered vulnerable. 15.4. Another important ruling rendered by the Hon'ble Supreme Court of India in Andaman Timber Industries Vrs. Commissioner of Central Excise, (2016) 15 SCC 785 = 2015 (324) ELT 641 (SC) does require referred to in the present context: "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It wo....