ARA wrongly admitted application under Section 98(2) after investigation proceedings had already commenced making advance ruling invalid

The Andhra Pradesh HC set aside advance ruling orders dated 05.03.2020 and 28.09.2020, holding that the Advance Ruling Authority (ARA) improperly admitted an application under Section 98(2) of CGST/APGST Act. The court ruled that when investigation proceedings had already commenced before the application filing, the ARA should not have admitted it per the proviso to Section 98(2). The court determined that investigation proceedings constitute judicial proceedings under the Act, making the advance ruling legally invalid. The petitioner was granted liberty to appear before appropriate authorities with factual and legal submissions.

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Issues Involved:
1. Legality of the Appellate Authority for Advance Ruling's (AAAR) order dated 28.09.2020.
2. Admissibility of the application by the Advance Ruling Authority (ARA) under Section 98(2) of CGST/APGST Act amidst ongoing investigation.

Issue-wise Detailed Analysis:

1. Legality of the AAAR Order dated 28.09.2020:
The petitioner sought a writ of mandamus to declare the AAAR order dated 28.09.2020 as illegal and arbitrary. The petitioner, an educational institution, had initially approached the ARA to determine if their coaching services for courses like CA and ICWA were exempt under Entry No.66(a) of Notification No.12/2017-CT(Rate). The ARA ruled against the petitioner, denying the exemption. The petitioner appealed to the AAAR, which upheld the ARA's decision. The petitioner then filed the present writ petition, arguing that the AAAR's order was flawed because the ARA should not have admitted the application due to an ongoing investigation by the DGGSTI.

2. Admissibility of the Application by ARA under Section 98(2) of CGST/APGST Act Amidst Ongoing Investigation:
The core argument was that the ARA should not have admitted the application because an investigation by the DGGSTI had already commenced before the application was filed. Section 98(2) of the CGST/APGST Act stipulates that the ARA shall not admit an application if the question raised is already pending or decided in any proceedings under the Act. The petitioner contended that the term "any proceedings" includes investigations, referencing Section 70 of the CGST/APGST Act, which treats inquiries as judicial proceedings.

The court examined precedents from various appellate authorities for advance ruling in Karnataka, Gujarat, and Maharashtra, which supported the petitioner's interpretation that ongoing investigations fall within the ambit of "any proceedings" under Section 98(2). The Karnataka case highlighted that an application for advance ruling could not be entertained if an investigation was already initiated. Similarly, the Gujarat and Maharashtra cases reinforced that investigations are considered proceedings under the Act, thereby precluding the admission of applications for advance ruling.

In the present case, the investigation had indeed commenced with the issuance of summons and recording of a panchanama on 01.07.2019, well before the petitioner filed the application before the ARA. Consequently, the ARA's decision to admit the application was deemed contrary to the proviso to Section 98(2).

Conclusion:
The court concluded that both the ARA's order dated 05.03.2020 and the AAAR's order dated 28.09.2020 were vitiated by law due to the pending investigation at the time of the application. The writ petition was allowed, setting aside both orders. The petitioner was granted liberty to present their case before the appropriate authority, which must consider the matter afresh without being influenced by the previous orders.

Final Order:
The writ petition was allowed, and both the ARA's order dated 05.03.2020 and the AAAR's order dated 28.09.2020 were set aside. The petitioner was given the liberty to appear before the appropriate authority and submit explanations, with the authority directed to proceed in accordance with the law. No costs were imposed, and any pending interlocutory applications were closed.

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