Advance ruling application cannot be rejected merely because inquiry commenced after filing under Section 98 CGST Act

Telangana HC allowed petition challenging rejection of advance ruling application under Section 98 CGST Act, 2017. Court held that inquiry/investigation commenced after filing advance ruling application cannot bar its consideration under first proviso to Section 98(2). Since petitioner filed application on 11.05.2019 and DGGI notice was issued on 15.12.2021, the word "proceedings" in the provision refers to formal proceedings where questions are decided or pending decision, not mere inquiries. Authority's rejection order dated 03.06.2022 was set aside and quashed.

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Issues:
Quashing of order by Telangana State Authority for Advance Ruling under CGST Act, Delay in providing advance ruling, Discrepancy in GST rates for works contract, Allegations of underpayment of GST, Rejection of application for advance ruling, Justification of rejection based on ongoing investigation by DGGI, Interpretation of "proceedings" under CGST Act, Comparison with a previous ruling by Telangana State Authority for Advance Ruling, Decision on setting aside the order and directing reconsideration.

Analysis:
The petitioner, a private limited company engaged in works contract business, sought to quash an order by the Telangana State Authority for Advance Ruling under the CGST Act, alleging a delay in providing an advance ruling on GST rates for works contracts with the Central Government Employees Welfare Housing Organisation. The petitioner faced discrepancies in GST rates with the Organization resulting in alleged underpayment of GST, leading to an application for advance ruling. However, the Authority rejected the application citing an ongoing investigation by the DGGI into the petitioner's activities. The Authority's decision was based on the first proviso to Section 98(2) of the CGST Act, which prohibits admitting an application if the question raised is pending or decided in any proceedings under the Act.

The Court analyzed the relevant sections of the CGST Act concerning advance rulings and the procedure to be followed. It emphasized that the term "proceedings" in the Act refers to cases where the question raised in the application has already been decided or is pending a decision, excluding inquiries or investigations. In a similar case where an investigation was initiated post-application, the Authority had granted an advance ruling. Therefore, the Court concluded that the ongoing investigation by DGGI post the application did not justify the rejection of the petitioner's application for advance ruling.

Based on this analysis, the Court set aside and quashed the order rejecting the petitioner's application. It directed the Telangana State Authority for Advance Ruling to reconsider the application filed by the petitioner and pass an appropriate order within two months from the date of the Court's order. The writ petition was allowed, and any pending miscellaneous applications were closed, with no order as to costs.

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