Advance Ruling Application for Completed Transactions Is Inmaintainable Under Section 95(a)

ORDER

At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and the West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘CGST Act, 2017’ and the ‘WBGST Act, 2017’) are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the WBGST Act, 2017.

1. This appeal has been filed by M/s. Karam Chand Thapar & Bros (Coal Sales) Limited [GSTIN: 19AABCK1281H1ZL] (hereinafter referred to as the appellant) in Form GST ARA-02 [vide Ref No. AD190426010112M] against the Ruling passed by the West Bengal Authority for Advance Ruling (hereinafter referred to as, the WBAAR) vide Order No. 31/WBAAR/2025-26 dated 13.02.2026/Karam Chand Thapar & Bros (Coal Sales) Ltd., In re   (AAR – WEST BENGAL) in respect of the application for Advance Ruling filed by him.

2. The appellant entered into three agreements with THDC India Ltd (formerly known as Tehri Hydro Development Corporation Limited) in the year 1996 for execution of work for the construction of Hydro Power Plants which was completed in the year 2007/08 and the final payment was received by the applicant in the year 2011. During the execution of the work, dispute arose over the extra expenses incurred by the applicant for the project which led to several litigations. Accordingly the Arbitral Tribunal was constituted by Supreme Court and Delhi High Court for deciding all the disputes between the parties pertaining to all the three packages. Finally, in the year 2023, Awards were passed in favour of the applicant which allowed private quarry costs, costs incurred on excavation method change, cost involved in use of higher grade of cement, cost involved in relocation of infrastructure, etc. incurred by the applicant. Conciliation Proceedings commenced between THDC India Ltd. and the Applicant in June 2024. Accordingly, the payment is received by the applicant as per the Settlement Agreement in October 2024.

3. In this context, the appellant filed an application before the WBAAR under sub-section (1) of section 97 of the CGST Act and the rules made there under seeking an advance ruling in respect of following question:

4. In their application made before the WBAAR, the respondent submitted inter alia the following:

5. The concerned officer from the revenue did not express any view on the merit of the issue raised by the applicant.

6. While passing the impugned ruling, the WBAAR considered all the records of the issue as well as submissions made by the authorized representative of the respondent and observed that:

7. Accordingly, the WBAAR, in its Order No. 31/WBAAR/2025-26 dated 13.02.2026 ruled that:

8. Aggrieved by the said ruling given by the WBAAR vide Advance Ruling Order No. 31/WBAAR/2025-26 dated 13.02.2026, the appellant filed the instant appeal in Form GST ARA-02 [vide Ref No. AD190426010112M] before the West Bengal Appellate Authority for Advance Ruling (hereinafter referred to as the WBAAAR).

9. The appellant submitted the following points/grounds while preferring the instant appeal before the WBAAAR authority:

The Circular states that these amounts received are for not tolerating an act or situation and to deter such acts; such amounts are for preventing a breach of contract or non-performance and thus, are mere “events” in a contract.

10. The personal hearing of the instant appeal was held on 30.06.2026.

11. In support of his case, the appellant inter alia has made a written submission before the WBAAAR, and also presented his case at the time of personal hearing reiterating the submissions as already stated in his grounds of appeal.

12. None was present from the respondent side at the time of personal hearing.

13. During the course of the hearing, the WBAAAR questioned the maintainability of the Advance Ruling application itself and observed that although the application had been filed seeking a ruling on a question falling within the scope of Section 97(2)(e) and/or (g) of the CGST Act, 2017. The maintainability of the application would thus require examination in light of the provisions of Section 95(a) of the CGST Act, 2017, which defines the expression “advance ruling” as a decision provided in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. The WBAAAR accordingly called upon the Appellant to address the issue of maintainability of the application with reference to the aforesaid statutory provisions.

14. In this context, the appellant has made an additional submission thereby stating that:

15. The submissions of the appellant before the WBAAR, the observations and Ruling of the WBAAR and the submissions of the appellant before the WBAAAR having been recorded already, we now proceed to make our observations in this case.

16. We have carefully considered the records of the case, the submissions advanced by the appellant, the impugned ruling passed by the WBAAR and the provisions of the CGST Act.

17. Before examining the merits of the questions answered by the WBAAR, we consider it necessary to examine whether the application itself was maintainable under the scheme of Chapter XVII of the Act. It is observed that the application was admitted by the WBAAR, being of the opinion that the questions on which the advance ruling has been sought fall within the scope of clause (e) of sub-section (2) of section 97 of the GST Act. However, it appears that while admitting the application, the WBAAR did not examine the aspect towards maintainability of the application itself which goes to the very foundation of the proceedings. A question relating to the maintainability of an application can always be examined by an appellate forum, for unless the application itself is maintainable, the question of examining its merits would not arise.

18. The institution of Advance Ruling under Chapter XVII is a distinct statutory mechanism conceived to provide certainty regarding the tax implications of transactions before disputes arise. It is intended to facilitate voluntary compliance by enabling an applicant to obtain clarity regarding the GST implications of a proposed transaction or a transaction in the course of being undertaken.

19. Section 95(a) of the CGST Act defines an “advance ruling” as a decision provided by the Authority in relation to a supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. The language employed by the Legislature is clear and significant. The jurisdiction of the Authority is thus intrinsically linked with transactions which are prospective or ongoing. Section 97 of the CGST Act specifies the categories of questions on which a ruling may be sought; however, the said provision merely identifies the subject matter of the questions and does not enlarge the jurisdictional requirement embodied in Section 95(a). Consequently, reliance placed by the applicant on Section 97(2)(g) of the CGST Act cannot obviate the necessity of satisfying the jurisdictional condition prescribed under Section 95(a) of the CGST Act.

20. The facts of the present case reveal that the contractual work stood completed prior to 01.07.2017. The disputes arising out of the contract were subsequently referred to arbitration and culminated in an arbitral award passed in the year 2023. Pursuant to the award, the applicant received the awarded amounts and thereafter furnished the relevant return in Form GSTR-3B, consciously treating the receipts as non-taxable on the ground that they represented compensation and not consideration for a supply.

21. The applicant had, therefore, already examined the tax implications of the transaction, formed a definite opinion and implemented such opinion by filing the statutory return before invoking the jurisdiction of the WBAAR. The application was, in substance, not one seeking advance certainty regarding a proposed or ongoing transaction but one seeking affirmation of a tax position already adopted.

22. More importantly, determination of the issues raised by the applicant necessarily requires an elaborate examination of facts. The controversy cannot be resolved merely by interpreting statutory provisions in the abstract. It requires examination of the terms of the original contract, the pleadings before the arbitral tribunal, the arbitral award, the nature of each individual claim, the evidence led by the parties, the books of account, statutory returns, relevant documents and such other records as may be necessary to determine the true character of each amount awarded.

23. Such an enquiry falls squarely within the adjudicatory jurisdiction conferred upon the jurisdictional proper officer under the Act. The proper officer is vested with statutory powers to scrutinise returns, call for records, verify documents, appreciate evidence and determine the correct tax liability after following the procedure prescribed under the CGST Act.

24. The jurisdiction exercised by the WBAAR is materially different. The Authority is intended to provide advance certainty and not to substitute the statutory process of adjudication in respect of completed transactions requiring detailed factual investigation. If applications of the present nature are entertained, the Authority would effectively be called upon to determine the correctness of tax positions already adopted by registered persons after completion of transactions, thereby traversing into a field reserved by the Legislature for scrutiny, adjudication and appellate remedies under the CGST Act.

25. The distinction between the jurisdiction of the WBAAR and that of the jurisdictional proper officer is neither incidental nor procedural; it is a conscious legislative design. The former is intended to facilitate voluntary compliance by providing advance certainty, whereas the latter is entrusted with the statutory responsibility of examining completed transactions through scrutiny, enquiry and adjudication. The two jurisdictions operate in distinct fields and ought not to be interpreted in a manner that permits one to supplant the other.

26. In the facts and circumstances of the present case, therefore, we are of the considered opinion that the WBAAR ought not to have entertained the application.

27. The appellant has raised objection towards the point whether WBAAAR has the jurisdiction of to question the admissibility of the instant application for advance ruling when the WBAAR has already admitted the issue and has pronounced its ruling.

28. In this context we are to express that the Courts of Law have time and again observed that the Higher Forums have their jurisdiction in examining a question of law which is based on facts. In the case of National Thermal Power Co. Ltd. v. CIT  229 ITR 383 (SC), the Hon’ble Supreme Court observed that “… Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. “[emphasis added]

29. We find that similar provision has been laid down in sub-section (1) of section 101 of the CGST Act which empowers the Appellate Authority to pass an order as it thinks fit after giving the parties to the appeal or reference an opportunity of being heard. [emphasis added]

30. Thus, without prejudice to the above conclusion, we find ourselves unable to concur with the reasoning adopted by the Authority while answering the questions on merits.

31. The Authority has proceeded on the premise that in respect of certain claims allowed by the arbitral tribunal, GST becomes payable because service tax had not been discharged under the erstwhile law and the provisions of Section 142 of the CGST Act stood attracted.

32. In our considered opinion, such an approach does not correctly reflect the scheme of the transitional provisions.

33. Section 142(2)(a) of the CGST Act applies where the price of goods or services supplied under a pre-GST contract is revised upwards after the appointed day. An arbitral award cannot, merely by reason of its existence, be equated with an upward revision of contractual consideration. The applicability of the provision necessarily depends upon the true nature of the claim allowed by the arbitral tribunal.

34. Similarly, Section 142(11)(a) of the CGST Act is intended to obviate double taxation during the transition from the existing law to GST. The relevant statutory test is whether tax was leviable under the existing law and not whether such tax was actually paid. The mere non-payment of service tax under the erstwhile regime cannot, by itself, constitute the basis for levy of GST.

35. Whether any component of the arbitral award represents consideration for additional supplies, an upward revision of contractual price, damages, compensation, reimbursement, interest or any other contractual entitlement necessarily requires detailed examination of facts and evidence. Such an exercise appropriately falls within the domain of the jurisdictional proper officer and ought not to be undertaken in proceedings under Chapter XVII.

36. For the foregoing reasons, the impugned ruling of the WBAAR cannot be sustained.

37. Accordingly, we pronounce our ruling as under: