The Orissa High Court has overturned an AAAR decision, emphasizing natural justice principles, in a case involving Pioneer Bakers’ Go Cool outlets facing GST imposition. Sandeep Sehgal, Partner Tax at AKM Global, underscores the decision’s significance for ensuring fairness in taxpayer dealings.
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The Orissa High Court has overturned a decision by the Appellate Authority of Advance Rulings (AAAR), emphasizing the importance of natural justice in dealing with taxpayers. The case revolves around Pioneer Bakers, the company operating under the brand name Go Cool, challenging the AAAR’s order that did not recognize its outlets as restaurants and imposed Goods and Services Tax (GST) on the items sold.
Pioneer Bakers, known for its Go Cool outlets, is in the business of crafting and selling an array of bakery items including cakes, pastries, pizzas, patties, sandwiches, burgers, handmade chocolates, cookies, and beverages. These products are not only prepared on-site but also served directly to customers, creating a unique dining experience. The company utilizes a workshop close to its outlets for preparing certain ingredients like chocolates and pizza bases, which are essential components of its final products.
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The dispute originated when Pioneer Bakers sought clarity from the state’s Advance Ruling Authority (AAR) on whether the items produced in their workshop and sold at their outlets should be classified under restaurant services for GST purposes. The AAR’s decision was in favor of the company, applying a unified GST rate of five percent without the benefit of input tax credit to these items, categorizing them under restaurant services.
However, the GST officers contested this ruling, leading to the AAAR setting aside the AAR’s decision. The AAAR ordered that items sold by the outlets would attract GST rates applicable to each item individually, deviating from the initial consolidated rate.
Pioneer Bakers then approached the Orissa High Court, arguing that the AAAR had based its decision on a report by GST officers, which the company did not have access to during the appeal hearing. Subsequently, a copy of the report was provided following a right-to-information application.
The Orissa High Court, in its ruling, remitted the matter back to the AAAR “for taking a fresh decision after due compliance with the principles of natural justice.” The court highlighted that the AAAR failed to disclose the material to the petitioner, stating 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, remarked on the court’s decision, stating that it reaffirms the significance of adhering to the principles of natural justice in dealings with taxpayers. This decision sets a precedent for ensuring transparency and fairness in the adjudication process, particularly when it comes to reports and evidence presented during legal proceedings.
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