The Madras High Court addressed the issue of whether advance rulings, which are binding on taxpayers and authorities, can be subject to judicial review. This case involved Arumugam, a proprietor in the tobacco business, who challenged the classification of his product. He argued that his processed tobacco should fall under a lower-tax category (CETH 2401), while the tax authorities classified it as manufactured chewing tobacco (CETH 2403). Despite unfavorable decisions from the Advance Ruling Authority and an Appellate Authority, Arumugam's writ petition was initially dismissed by a Single Judge, prompting him to file a writ appeal before the Division Bench.
The court clarified that while advance rulings are binding, they can still be challenged under constitutional jurisdiction, albeit within a limited scope. This review is confined to examining the legality, procedural correctness, jurisdictional errors, and any potential perversity, rather than substituting the authority’s decision with another possible view. The court also observed inconsistency in how similar cases with identical manufacturing processes were classified under different tax entries, which led to unequal tax treatment.
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Emphasizing the principle of equality under Article 14, the court found that allowing different tax treatments for similar products was unjust. Consequently, the court intervened to set aside the impugned orders to ensure uniform tax treatment and prevent discrimination among similarly placed taxpayers. This decision underscores the court's role in maintaining fairness and consistency in tax classifications.
Order Date -17 April 2026
Parties: Arumugam (Proprietor, M/s Kavi Cut Tobacco) Vs Commissioner of GST & Central Excise & Another
Facts -
- Arumugam, engaged in tobacco business, processed raw tobacco leaves by cleaning, curing (liquoring), cutting, and packing them into pouches for sale under a brand name.
- He claimed his product falls under a lower-tax classification (CETH 2401), but the department classified it as “manufactured chewing tobacco” (CETH 2403).
- The Advance Ruling Authority and Appellate Authority both ruled against him, and even his writ petition was dismissed by a Single Judge.
- Aggrieved, he filed this writ appeal before the Division Bench challenging the classification and binding nature of the advance ruling.
Issue -
- Whether the classification determined in advance ruling (binding on assessee) can be interfered with by the High Court?
Order -
- The Court acknowledged that advance rulings are binding on the applicant and authorities, but clarified that they are still open to challenge under constitutional jurisdiction, though within a narrow scope of judicial review.
- It emphasized that judicial review is limited to checking legality, procedural correctness, jurisdictional errors, and perversity, and not to substitute the authority’s view merely because another view is possible.
- The Court further noted that similar cases involving identical manufacturing processes had already been decided differently, allowing classification under a lower tax entry, leading to inconsistency.
- Highlighting the principle of equality, the Court held that allowing different tax treatments for identical products would violate Article 14, and hence intervened to set aside the impugned orders to ensure uniformity.
