AAR Rulings Are Not Binding on Other GSTIN Holders: Madhya Pradesh High Court
The Madhya Pradesh High Court ruled that an Advance Ruling (AAR) issued to one business entity (GSTIN holder) is not legally binding on a different, independent GST-registered entity, even if both operate under the same brand name.
Key Points of the Judicial Ruling
- AAR’s Limited Applicability: The court referenced Section 103 of the CGST Act, which explicitly limits the binding effect of an AAR ruling only to the applicant who sought it and the concerned officers in that jurisdiction. Therefore, an AAR issued to the “head of the group” cannot be mechanically applied to a distinct proprietor with a separate GSTIN.
- Requirement for Independent Examination: The Adjudicating Authority erred by issuing a demand order of ₹64.89 lakh against the petitioner simply by relying on the non-binding AAR against a related entity (operating under the same brand, “Karnawat Paan”). The court held that the authority must independently examine the specific facts and merits of the petitioner’s case.
- Quashing of Order: The court quashed the show cause notice and demand order because the adjudicating authority issued a non-speaking order, which merely dismissed the petitioner’s reply as “not satisfactory” without any reasoned discussion or independent analysis. The authority was directed to re-decide the matter on its merits, uninfluenced by the previous AAR ruling.