The Rajasthan High Court has held that the statutory 90-day period prescribed under Section 101(2) of the Central Goods and Services Tax (CGST)/Rajasthan GST (RGST) Act for disposal of appeals by the Appellate Authority for Advance Ruling (AAAR) is directory and not mandatory, observing that expiry of the period does not extinguish the statutory right of appeal.
The judgment has since reached the Supreme Court, which has issued notice in the Special Leave Petition (SLP) and directed the Rajasthan AAAR not to proceed further with the departmental appeal until the next hearing.
A Bench comprising Justice Ujjal Bhuyan and Justice Atul S. Chandurkar, while issuing notice to the respondents, directed that the Rajasthan Appellate Authority for Advance Ruling shall not proceed further with the hearing of the departmental appeal until the next date of hearing, granting interim protection to the petitioner pending consideration of the challenge to the Rajasthan High Court’s judgment.
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The Rajasthan High Court dismissed the writ petition which had challenged the maintainability of departmental appeals against an Advance Ruling that had held that free-of-cost (FOC) diesel supplied by the service recipient is not includible in the taxable value of Goods Transport Agency (GTA) services.Â
The controversy originated when the transport company sought an advance ruling under Section 97 of the RGST Act on whether diesel supplied free of cost by the recipient of transportation services should form part of the taxable value of GTA services.
The Rajasthan Authority for Advance Ruling (AAR), by its ruling dated June 16, 2022, answered the question in favour of the applicant, holding that the value of such FOC diesel was not liable to be included in the taxable value of transportation services. During the AAR proceedings, the jurisdictional State GST officer had also supported the applicant’s stand.
Subsequently, separate appeals were filed before the Appellate Authority for Advance Ruling by both the Central GST authorities and the State GST authorities challenging the favourable ruling.
Rather than contesting the merits immediately, the petitioner questioned the maintainability of the departmental appeals on several procedural grounds.
The transport company argued that the AAAR had failed to decide the appeals within the statutory period of 90 days under Section 101(2), making the proceedings non est. It also contended that the departmental appeals themselves were barred by limitation, that the CGST officer lacked jurisdiction to file the appeal, that the department could not reverse the stand taken before the AAR, and that manual filing of appeals instead of electronic filing violated the statutory procedure.
Rejecting the principal challenge, the High Court ruled that the 90-day timeline prescribed under Section 101(2) is intended to ensure expeditious disposal but cannot be interpreted as a jurisdictional condition whose breach automatically terminates appellate proceedings.
The Bench observed that the GST legislation contains no provision prescribing any consequence for failure to adhere to the 90-day period, making it clear that the legislature did not intend automatic lapsing of appeals.
The Court further reasoned that accepting the petitioner’s interpretation would produce an anomalous result by destroying the statutory right of appeal merely because the appellate authority could not conclude proceedings within the prescribed period.
According to the Court, while the word “shall” ordinarily denotes a mandatory requirement, whether a provision is mandatory or directory depends upon the statutory context, legislative purpose and consequences of the interpretation. Since a mandatory construction would defeat the very appellate remedy created by the statute, the provision must be treated as directory.
The Bench observed that delay by a quasi-judicial authority, although undesirable, does not invalidate proceedings or confer finality upon an order already under challenge.
The Court emphasised that the petitioner had not demonstrated any actual prejudice arising from the delay and therefore could not seek dismissal of the departmental appeals solely on the ground that the prescribed period had expired.
The High Court also rejected the petitioner’s contention that the departmental appeals were time-barred.
The Court accepted the findings of the Appellate Authority that the State GST authorities received the advance ruling on September 15, 2022, while the Central GST authorities received it on June 29, 2022. On that basis, the State GST appeal was filed within the initial limitation period, whereas the Central GST appeal, filed within 56 days, fell within the maximum condonable period of 60 days after appropriate condonation.
The Court held that questions regarding actual receipt of the advance ruling involved factual appreciation already undertaken by the Appellate Authority and did not warrant interference in writ jurisdiction.
Another important issue before the Court concerned the locus of the Central GST authorities to challenge the advance ruling.
Rejecting the petitioner’s objections, the Bench held that the expressions “concerned officer” and “jurisdictional officer” used in Sections 98 and 100 of the GST legislation refer to two distinct authorities—one under the Central GST administration and the other under the State GST administration.
Accordingly, both officers possess independent statutory rights to challenge an advance ruling, irrespective of whether they participated during the original proceedings before the Authority for Advance Ruling.
The petitioner also argued that since the jurisdictional State GST officer had supported the assessee before the AAR, the department could not subsequently take a contrary position in appeal.
The High Court declined to accept this submission, reiterating the settled principle that there can be no estoppel against the State in matters involving statutory duties and taxation. It observed that an incorrect legal position adopted by a subordinate officer does not prevent higher authorities from challenging the ruling through the statutory appellate mechanism.
Addressing procedural objections relating to filing of appeals in physical form, the Court held that Rule 107A of the CGST Rules expressly preserves manual filing notwithstanding provisions requiring electronic filing.
The Bench observed that procedural requirements regarding electronic filing cannot be elevated into jurisdictional barriers that defeat otherwise maintainable statutory appeals.
Finding no infirmity in the Appellate Authority’s order rejecting the preliminary objections, the Rajasthan High Court dismissed the writ petition and directed the petitioner to participate in the appellate proceedings on merits before the AAAR.
The matter has now reached the Supreme Court through a Special Leave Petition.
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