AAR rejects advance ruling application for non-disclosure of pending DGGI proceedings under Section 98(2) CGST Act

The AAR-TN rejected an advance ruling application due to non-disclosure of ongoing DGGI proceedings. The applicant filed the advance ruling application on 27.06.2022 while DGGI investigation was already underway, with an incident report dated 24.06.2022 determining tax liability of Rs. 474 lakhs. The investigation involved statements from the applicant's registrar recorded on 18.04.2022 and 14.06.2022. Since proceedings were pending against the applicant at the time of filing, the application was deemed inadmissible under the first proviso to Section 98(2) of the CGST Act and consequently rejected.

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Issues Involved:
1. Admissibility of the advance ruling application.
2. Definition and interpretation of 'proceedings' under the CGST Act.
3. Determination of tax liability on fees collected by the applicant.

Summary:

1. Admissibility of the Advance Ruling Application:
The applicant sought an advance ruling to determine the tax liability on services as per Section 97(2)(e) of the GST Act, 2017. The application was filed on 27.06.2022. However, the Authority found that the questions raised were already under investigation by the Directorate General of GST Intelligence (DGGI), Chennai Zonal Unit. According to Section 98(2), the Authority shall not admit an application if the questions are already pending or decided in any proceedings under the Act. The Authority concluded that the application was inadmissible due to the ongoing investigation, as indicated by the Incident Report No. 89/2022 dated 24.06.2022.

2. Definition and Interpretation of 'Proceedings' under the CGST Act:
The applicant argued that 'proceedings' should be interpreted literally and distinguished from 'enquiry' or 'summons'. They relied on various judicial pronouncements to support this view. However, the Authority noted that the term 'proceedings' is used in various sections of the Act and encompasses a broad range of activities, including investigations under Section 70. The Authority referenced the Hon'ble High Court of Andhra Pradesh's ruling in Master Mind Vs Appellate Authority for Advance Ruling, which held that an advance ruling application is inadmissible if proceedings on the same issue had commenced prior to filing.

3. Determination of Tax Liability on Fees Collected by the Applicant:
The applicant, a regulatory body, argued that the fees collected for statutory functions do not constitute a 'supply' under the GST Act and thus should not be taxed. They claimed that the fees are for discharging sovereign functions and do not involve any service rendered to the parties. The concerned State authority countered that the fees collected are for services rendered and thus are taxable. The DGGI's investigation determined a tax amount of Rs. 474 lakhs on the fees collected, considering them as consideration for supply under Section 7 of the Act.

Ruling:
The Authority for Advance Ruling, Tamil Nadu, rejected the application based on the first proviso to Section 98(2) of the GST Act, which prohibits admitting applications where the questions raised are already under investigation or decided in any proceedings under the Act.

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