2021 (7) TMI 1368 - AAAR - GST

Appellate authority dismisses appeal for advance ruling application citing ongoing investigations.

In Re: M/s. Saisanket Enterprises,

The appellate authority upheld the rejection of an application for advance ruling under the CGST Act, 2017, citing ongoing investigations by DGGSTI into ... Levy of GST on sub contractor - sub contractor executes works contract pertaining to dam, wherein the principal contractor is liable for tax @ 12%, for the period from 22-01-2017 to 25-01-2018 - HELD THAT:- Sub-section (2) of Section 70 is very clear that every such inquiry shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code. Therefore, the appellant's contention that mere issue of such letter to them by DGGSTI authorities cannot be said to be any proceedings within the meaning of proviso to Section 98(2) of CGST Act, 2017, cannot be agreed upon. For sub-contractors, subsequently the rate of tax for such services got reduced to 12% vide Notification No.1/2018- Central Tax (Rate) dated 25.01.2018. It was also informed that the said investigation in the matter is undergoing. As per the submission of appellant and available records, we find that Directorate General of Goods & Services Tax Intelligence (DGGSTI), Regional Unit, Indore, has already initiated proceeding against the appellant on the same question raised by the appellant before us and the said proceeding is still pending before the DGGSTI, Indore. The first proviso to section 98(2) of CGST Act, 2017 is very clear, that the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in case of an applicant under any of provisions of this Act - the Advance Ruling Authority has rightly rejected the appellant's application as per the first proviso to section 98(2) of CGST Act, 2017 on the grounds that the question raised by the appellant before the Authority is pending with the DGGSTI and proceeding against the appellant is underway by the DGGSTI, Regional Unit, Indore. Section 100(1) mandates that only a ruling pronounced under sub-section (4) of section 98 of CGST, Act, 2017 can be appealed before the Appellate Authority for advance, Ruling. It is found that the Advance Ruling Authority in its Order 20/2020 has rejected the application of the appellant under section 98(2) of CGST, Act, 2017, and it cannot be said to be any advance ruling pronounced under sub-section (4) of section 98 of CGST, Act, 2017, therefore the appellants appeal fails on this count also. The appeal filed by the appellant M/s Saisanket Enterprises stands dismissed on all accounts. Issues Involved:1. Whether the application for advance ruling is barred under the proviso to Section 98(2) of the CGST Act, 2017.2. The applicable rate of tax for a sub-contractor executing works contract pertaining to a dam, where the principal contractor is liable for tax at 12%, for the period from 22-08-2017 to 25-01-2018.Issue-wise Detailed Analysis:1. Bar under Proviso to Section 98(2) of the CGST Act, 2017:The appellant contended that the mere issuance of a letter by the DGGSTI authorities cannot be considered as any proceedings within the meaning of the proviso to Section 98(2) of the CGST Act, 2017. However, the records showed that the Additional Assistant Director, DGGI, Regional Unit, Indore, issued a summon under Section 70 of the CGST Act, 2017, indicating an inquiry into GST evasion. Section 70(2) clarifies that such an inquiry is deemed a 'judicial proceeding' under Sections 193 and 228 of the Indian Penal Code. Therefore, the appellate authority disagreed with the appellant's contention and upheld that the ongoing investigation by DGGSTI qualifies as proceedings under the proviso to Section 98(2).The Deputy Director of DGGSTI confirmed that proceedings were initiated against the appellant regarding the wrong availment of a lower GST rate of 12% for works contract services provided to the government, which should have been taxed at 18% for the period in question. Since the investigation was ongoing, the appellate authority found that the Advance Ruling Authority correctly rejected the application under the first proviso to Section 98(2) of the CGST Act, 2017.2. Applicable Rate of Tax for Sub-Contractor:The appellant sought a determination of the applicable tax rate for a sub-contractor executing a works contract for a dam, where the principal contractor is liable for a 12% tax rate, for the period from 22-08-2017 to 25-01-2018. The appellant argued that the issue was purely a question of law and should not be barred by Section 67 proceedings. They cited various authorities and case laws to support their claim that differences in the interpretation of law do not constitute an intent to evade tax.However, the appellate authority noted that the Advance Ruling Authority had rejected the application based on the ongoing proceedings by DGGSTI, which were investigating the appellant's tax liabilities. The appellate authority also referred to Section 100(1) of the CGST Act, 2017, which allows appeals only against rulings pronounced under sub-section (4) of Section 98. Since the Advance Ruling Authority had rejected the application under Section 98(2) and not pronounced any ruling under Section 98(4), the appeal was found to be non-maintainable.Conclusion:The appellate authority concluded that the appeal was not maintainable under the first proviso to Section 98(2) and Section 100(1) of the CGST Act, 2017. Therefore, without examining the merits of the case, the appeal was dismissed. The order of the Advance Ruling Authority dated 10.12.2020 was upheld, and the appeal filed by the appellant was dismissed on all accounts.