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The Orissa High Court has set aside an order by the Appellate Authority of Advance Rulings (AAAR) on not recognising outlets of a company as restaurants and levying Goods and Services Tax (GST) on items sold there.
The case relates to a company called Pioneer Bakers, which operates its outlets under the brand name of Go Cool.
It has asked the authority to take a fresh look after giving a fair chance to the company to respond.
Go Cool specialises in the making and selling of bakery products such as cakes, pastries, pizzas, patties, sandwiches, burgers, handmade chocolates, cookies, and beverages in its outlets.
The products are prepared on the premises and served to customers.
The materials for some of the items, such as chocolates and pizza bases, are prepared in its workshop, located near the premises of the outlet of the petitioner.
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The petitioner approached the state authority for an advance ruling (AAR) and sought to know whether the items prepared in the workshop, among others, and sold in outlets would come under restaurant services and the tax rate applicable to them.
The AAR ruled that these items would come under restaurant services and the GST at the rate of five per cent without input tax credit would apply to them.
The GST officers approached the AAAR.
The AAAR has set aside the ruling by the AAR and ordered that items sold by the outlets would attract GST rates applicable to them individually.
Now, the company approached the high court and contended the AAAR gave the ruling based on the report by GST officers and the company did not even get a copy of the report.
Later, a copy was provided on the right-to-information application.
The company alleged that the report contained untested material and views of GST officers.
The company urged the court that the report collected behind its back and not confronted it during the hearing of the appeal at the AAAR ought not to have been made the basis for reversing the adjudication made by the AAR.
The court remitted the matter to the AAAR “for taking a fresh decision after due compliance with the principles of natural justice.”
It pointed out that what “does not transpire is that the AAAR has disclosed the material to the petitioner” and therefore, “it is safe to say that the petitioner had been deprived of a reasonable and fair opportunity to submit its explanation” before the AAAR.
Sandeep Sehgal, Partner Tax at AKM Global, said the court has reaffirmed the importance of adhering to the principles of natural justice in dealing with taxpayers.
