AAAR cannot condone a delay exceeding 30 days
An advance ruling helps the applicant in planning his activities, which are liable for payment of GST, well in advance and helps in avoiding long drawn and expensive litigation at a later date. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as Government authorities. Section 100(1) of the CGST Act, 2017 provides that concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced by the Authority for Advance Ruling, may appeal to the Appellate Authority. If the applicant is aggrieved with the finding of the AAR, he can file an appeal with Appellate Authority within thirty days from the date on which the advance ruling is communicated.
Can Appellate Authority condone a delay in filing an application, if the appellant has applied after the lapse of 30 days?
Let us refer to the case of M/s Durga Projects & Infrastructure Pvt Ltd vs Karnataka AAAR 2019 to understand the same:-
Facts of the Case:-
- The Appellant is a company engaged in construction and sale of residential apartments who has executed projects under JDA with Landowners for an agreed ratio of built up area.
- Construction was commenced during pre-GST period and continued under GST regime.
Ruling was sought for the following issues:-
- Applicability of GST on partially completed flats having identified customers before GST regime.
- Applicability of GST on partially completed flats, where customers are identified after implementation of GST regime.
- Applicability of GST on partially completed flats where no customers are identified.
Ruling of Authority of Advance Ruling (AAR)
- In respect of partially completed fiats having identified customers before GST regime, the Applicant is liable to pay service tax under the Finance Act, 1994 proportionate to the services provided up to 30.06.2017 and from 01.07.2017 onwards, liable to pay GST proportionate to the services provided effective from 01.07.2017, in terms of Section 142(11)(b) of the CGST Act, 2017.
- In respect of partially completed flats, where customers are identified after implementation of GST, the applicant is liable to pay GST on the transaction value of supply.
- In respect of partially completed flats where no customers are identified, the applicant is not liable to GST as no supply is involved. However, if the supply is made prior to the issuance of completion certificate then GST is liable to be paid on the transaction value of supply, as answered in 2nd point above.
Being aggrieved by the ruling of the Authority with respect of the question raised for partially completed flats where customers are identified under GST regime but work commenced prior to GST regime (2nd point), an appeal was preferred before Appellate Authority for Advance Ruling (AAAR).
Submissions by the Appellant before AAAR:-
1.Appellant submits that the ruling given that the Appellant is liable to pay GST on the entire value in respect of partially completed flats where customers are identified under GST regime but work commenced prior to GST regime, runs contrary to the definition of “works contract” as defined under section 2(119) of GST Law.
2. Section 9 is the main charging section for levy of tax on supply of goods or service or both; that the term “supply” is defined under section 7 of the Act; that Schedule II to the CGST Act, deals with activities to be treated as supply of goods or supply of service.
3. According to Entry 5 of the said Schedule, the following shall be treated as “supply of service”:
i. renting of immovable property
ii. construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation, whichever is earlier.
4. Therefore, construction of building is works contract. Works contract activity is classified as supply of service. Supply of service falls under the scope of ‘supply’ as defined under Section 7 of the Act and therefore attracts tax under Section 9 of the Act.
5. The Appellant submitted that, in the aspect of law, a contract is a legally binding agreement between two or more parties. Therefore, one of the essential elements of contract / agreement is there must be two or more persons are required. Applying the same principle, an activity of building or construction amounts to works contract only when there is a contract. In other words, there should be person to whom work is executed. If work is executed without being a person, such activity does not fall under the definition of “works contract”.
Proceedings of AAAR:-
- Before the AAAR could proceed with the main issue in appeal, they found that there had been a delay in filing the appeal.
- The appeal was filed by the appellant before the AAAR after a period of 77 days from the date of receipt of the order of the AAR.
- On a plain reading of the provisions of Section 100 of the said Act, it is apparent that the same mandates that an appeal should be filed within 30 days from the date of communication of the advance ruling order that is sought to be challenged.
- However, in view of the proviso thereto, the Appellate Authority is empowered to allow the appeal to be presented within a further period of 30 days if it is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the initial period of 30 days.
- In other words, the total limitation period during which an appeal can be preferred before this Authority is 60 days from the date of communication of the advance ruling order, on showing sufficient cause.
- The proviso does not mean that the appeal can be presented after 60 days. If it is presented beyond the period of 30 days but within the further period of 30 days as stipulated by the proviso, then, the Appellant has to satisfy the Appellate Authority that there was sufficient cause which prevented him from presenting the appeal within the period of 30 days.
- In the instant case, the appeal filed against the Advance Ruling order is evidently belated by 77 days. The appellant, however, has not explained the reason for the delay in filing the appeal.
Reference to other Cases
Singh Enterprises vs CCE (2008)
- The Supreme Court in the said case interpreted Section 35 of the Central Excise Act, 1944 which is similar to Section 100 of the CGST Act
- SC examined the question whether the Commissioner (Appeals) has the power to condone the delay beyond the period of 30 days from the date of expiry of the period of 60 days prescribed for filing the statutory appeal and also whether the High Court, in exercise of the power conferred under Article 226 of the Constitution of India.
- The Commissioner of Central Excise (Appeals) as also the Tribunal are vested with jurisdiction to condone the delay beyond the permissible period provided under the Statute.
- The first proviso to Section 35 makes the position clear that the appeal has to be preferred within 3 months from the date of communication to him of the decision or order.
- However, if the Commissioner is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, he can allow it to be presented within a further period of 30 days.
- The appellate authority has no power to allow the appeal to be resented beyond the period of 30 days. The language used makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning delay only up to 30 days after the expiry of 60 days which is the normal period for preferring appeal.
Commissioner of Customs and Central Excise vs Hongo India (P) Ltd —(2009)
- Supreme Court considered the question whether Section 5 of the Limitation Act can be invoked for condonation of delay in filing an appeal or reference to the High Court
- SC observed that Sections 35 makes the position clear that an appeal and reference to the High Court should be made within 180 days only from the date of communication of the decision or order.
- The language used makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning the delay only up to 30 days after expiry of 60 days which is the preliminary limitation period for preferring an appeal.
- In the absence of any clause condoning the delay by showing sufficient cause after the prescribed period, there is complete exclusion of Section 5 of the Limitation Act. The High Court was, therefore, justified in holding that there was no power to condone the delay after expiry of the prescribed period of 180 days.
Opinion of AAAR
- It is evident that the AAAR being a creature of the statue is empowered to condone a delay of only a period of 30 days after the expiry of the initial period for filing appeal.
- As far as the language of Section 100 of the CGST Act is concerned, the crucial words are “not exceeding 30 days”.
- To hold that AAAR could entertain this appeal beyond the extended period under the proviso would render the phrase “not exceeding thirty days” insignificant.
- Therefore, it was held that the AAAR are not empowered to condone the delay of 77 days in filing of this appeal.
Since the appeal could be not allowed to be presented on account of time limitation, the question of discussing the merits of the issue in appeal did not arise before the AAAR.