2023 (5) TMI 1069 - AAAR - GST

Taxability under GST Act and Compensation cess Act - coal rejects whose invoice is raised by the applicant upon washery/job worker - eligibility to avail Input Tax Credit (ITC) of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning - admissible proportion of Input Tax Credit. HELD THAT - The question of maintainability was not examined at the AAR stage and it would be in the fitness of the things that the issue be re-examined by AAR itself. As per subsection (1) of Section 101 of the CGST Act 2017, the appellate authority may pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to - As the power of remand back is not clearly detailed in the provision, it would be in fitness of things to refer to other Acts wherein similar provisions have been provided to appellate authorities. A bare perusal of the section 35A of Central Excise Act, 1944 and sub-section (5) of Section 85 of Finance Act, 1994, shows that the language used in the section 35A (as applied to cases of Service tax vide Section 85(5)) is similar to that used in Section 101 of CGST Act, 2017. Therefore, the jurisprudence so developed over the years may be referred as para-materia while ascertaining the ambit and scope of the powers of the AAAR. Thus, it is apparent that the appellate authority can remand back the appeal of the appellant to the AAR, Punjab to re-examine the maintainability of the application filed by the appellant as per sub-section (2) of Section 98 of the CGST Act, 2017 and accordingly pass the order on merit.

Summary

Issues Involved:
1. Taxability of coal rejects under GST Act and Compensation Cess Act.
2. Eligibility of Input Tax Credit (ITC) on GST and Compensation Cess for raw coal.
3. Admissible proportion of Input Tax Credit.

Summary:

Issue 1: Taxability of Coal Rejects
The appellant sought clarification on whether coal rejects are taxable under the GST Act and Compensation Cess Act. The Authority for Advance Ruling (AAR), Punjab, ruled that coal rejects are classified under HSN 2701 and are taxable at a 5% GST rate plus Rs 400 PMT compensation cess.

Issue 2: Eligibility for Input Tax Credit (ITC)
The appellant inquired about the eligibility to avail ITC of GST and Compensation Cess for raw coal procured and transferred to a washery/job worker for cleaning. The AAR Punjab ruled that if the applicant meets the eligibility conditions under Section 16 of the CGST Act, 2017, and the type of ITC does not fall under the categories prescribed under Section 17, the applicant is eligible to avail ITC. The principal can avail ITC for goods sent directly to the job-worker's premises.

Issue 3: Admissible Proportion of Input Tax Credit
The appellant sought clarity on the proportion of ITC admissible. The AAR Punjab ruled that the formula prescribed under Rule 42 of the CGST and PGST Rules, 2017, should be followed. This involves making a reversal in the proportion of exempt/taxable turnover.

Appeal to Appellate Authority for Advance Ruling (AAAR):
The appellant was dissatisfied with the AAR's clarity on the admissible proportion of ITC and sought further clarification. The appellant argued that the ITC reversals should be based on the actual quantum of compensation cess paid on the coal used in the exempted activity rather than its value.

Discussion and Findings:
The AAAR examined whether the issue raised by the appellant falls under clause (c) or clause (d) of sub-section (2) of Section 97 of the CGST Act, 2017. The AAAR determined that the question of maintainability was not examined at the AAR stage and should be re-examined by the AAR itself. The AAAR cited various legal precedents to support the power of remand back to the AAR for re-examination.

Order:
The AAAR remanded the appeal to the AAR, Punjab, to re-examine the maintainability of the application under sub-section (2) of Section 97 of the CGST Act, 2017, and pass an order on its maintainability. The appeal was disposed of accordingly.