Introduction
The Hon’ble Calcutta High Court’s recent ruling in Sarkar Diesel v. Deputy Commissioner, State Tax[i] addresses critical issues concerning the Goods and Services Tax (‘GST’) penalties under ss. 73 and 74 of the West Bengal Goods and Services Tax Act, 2017 (‘Act’) and the applicability of advance rulings across different jurisdictions, specifically highlighting the non-binding nature of an advance ruling from the Goa Authority on tax matters arising in West Bengal.
Brief Facts
Sarkar Diesel (‘Appellant’) challenged three orders wherein the Ld. Single Judge had declined to grant interim relief. The appeals revolved around the GST penalty imposed by the Deputy Commissioner of State Tax for the periods 2017-18 to 2019-20.
The Appellant argued that s. 74 of the Act under which the penalty was imposed was inapplicable as there was no evidence of fraud, and instead, the penalty should have been imposed under s. 73 of the Act, which deals with cases lacking fraudulent intent.
The Indian Oil Corporation Limited (‘IOCL’), in a declaration furnished to the Appellant on 04.08.2023, confirmed that it had discharged the GST liability on the services availed from the Appellant under the reverse charge mechanism (‘RCM’).
The issue was whether the Appellant could benefit from a declaration by the IOCL for receiving services availed from the Appellant, as this declaration was issued post-appeal disposal.
Additionally, the Ld. assessing officer (‘AO’) in West Bengal relied on an Advance Ruling from Goa, which the Appellant contended was inapplicable to the present case.
Held
The High Court set aside the orders of the Appellate Authority and the Original Authority/AO and remanded the matter back to the AO for re-adjudication. The key findings and observations were:
Re-adjudication Order: The High Court directed that the matter be remanded to the original authority for re-adjudication, considering the new declaration from the IOCL, which was unavailable during the initial proceedings. This declaration confirmed that the IOCL had discharged GST liability under the RCM for services availed from the Appellant.
Advance Ruling from Goa: The High Court ruled that the Advance Ruling rendered by the Authority in Goa could not automatically apply to a taxpayer in West Bengal. The Goa ruling was specific to the applicant in that jurisdiction and did not bind taxpayers or jurisdictions elsewhere.
Procedure for Re-adjudication: The Appellant was directed to submit a fresh representation with all supporting documents within four weeks. The AO was instructed to provide a personal hearing and issue a reasoned order based on the merits and law, disregarding the earlier order and the Advance Ruling from Goa.
Our Analysis
The High Court’s ruling clarifies several points about the procedural fairness and proper application of GST law.
Firstly, the High Court’s decision to remand the case for re-adjudication based on new documentation provided by IOCL highlights that the adjudicating authority must exercise flexibility in their decision-making, especially when new, relevant evidence surfaces after the initial adjudication. The declaration from the IOCL confirming the discharge of GST liability under the RCM was received only after the disposal of the appeal. The High Court rightly pointed out that such significant documents, even if presented late, must be considered to ensure that the taxpayer is not unjustly penalised. This underscored the principle that procedural rules should serve the purpose of achieving justice rather than hindering it.
Secondly, it clarified that advance rulings are jurisdiction-specific and cannot be automatically applied to taxpayers in another state without due consideration. This ruling bound only the taxpayers who sought the decision and the tax department in that specific state, i.e., in this case, Goa. Applying such rulings universally without considering each case's local context and specific circumstances would be inappropriate. This serves as a reminder to tax authorities to exercise caution when using advance rulings from other jurisdictions and to ensure their decisions are based on applicable laws and regulations within their own state/jurisdiction.
End Note
[i] 2024 SCC OnLine Cal 6619.
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.