2022 (12) TMI 1029 - HC - GST

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 ... Validity of advance ruling - main plank of argument of petitioner is that even by the date of filing of application before ARA on 15.12.2020, the GST has already cancelled the registration under GST Act of the petitioner - HELD THAT:- Section 98(2) of the CGST/APGST says that authority may after examining the application and records called for and after hearing the applicant or his authorized representative, by order, either admit or reject the application. Thus, the subsection (2) says that after hearing the petitioner or his authorized representative, the authority may either admit or reject the application. However, for admitting the application of the applicant, a qualification is provided in the form of proviso to the said section. The proviso says that the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions in the said Act - the proper officer under this Act shall have the power to summon any person either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure. Such enquiry referred to in sub-section (1) shall be deemed to be judicial proceedings within the meaning of section 193 and 228 of the Indian Penal Code. Thus, the proceedings conducted by the investigating authority under the provisions of this Act shall be construed as judicial proceedings as per the CGST/APGST Act. Having regard to the legal position that when investigation has already commenced prior to the filing of application, the ARA shall not admit the application as per proviso to sub-section (2) of Section 98, the ARA should not have admitted the application in the instant case and issued its ruling. Therefore, the said order dated 05.03.2020 is vitiated by law - the order dated 05.03.2020 of ARA and order dated 28.09.2020 of the appellate authority are set aside and the petitioner is given liberty to appear before the appropriate authority and submit his explanation and to take all factual and legal pleas that are permissible under law. This writ petition is allowed. 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.