AAR Gujarat voids advance ruling under section 104 CGST Act for suppressing material facts about ongoing DGGI investigation

The AAR Gujarat declared its advance ruling dated 20/01/2021 void under section 104 of CGST Act 2017 due to suppression of material facts by the applicant. The applicant failed to disclose ongoing DGGI investigation proceedings when applying for advance ruling regarding GST classification of plastic toys and ITC claims. The authority relied on Andhra Pradesh HC precedent establishing that pending proceedings bar admission of advance ruling applications under section 98(2) proviso. Since the applicant had already paid differential duty acknowledging the investigation, the ruling was obtained through misrepresentation and deemed void ab initio.

---

---

Issues Involved:
1. Classification of plastic toys and applicable GST rate.
2. Eligibility to claim Input Tax Credit (ITC) on debit notes issued by the supplier for past transactions.
3. Validity of the Advance Ruling obtained by the applicant considering the alleged suppression of material facts.

Summary:

1. Classification of Plastic Toys and Applicable GST Rate:
The applicant sought an advance ruling on the classification and GST rate applicable to plastic toys. The GAAR, in its order dated 20.01.2021, classified the plastic toys under HSN code 95030030 with a GST rate of 12% (6% SGST + 6% CGST).

2. Eligibility to Claim Input Tax Credit (ITC):
The applicant also inquired about the eligibility to claim ITC on debit notes issued in the current financial year (2020-21) for transactions from 2018-19. The GAAR ruled that the applicant cannot claim ITC in such cases.

3. Validity of the Advance Ruling:
The DGGI, Pune, alleged that the advance ruling was obtained by suppressing material facts, specifically ongoing investigations against the applicant. The Joint Commissioner, CGST Bhavnagar, and DGGI Pune provided evidence that investigations were initiated before the application for the advance ruling was filed on 30.11.2020. The applicant paid significant amounts in differential GST and interest during these investigations.

The applicant argued that no formal proceedings were pending at the time of filing the application, distinguishing between "inquiry" and "proceedings" under GST law. They cited various legal precedents to support their claim, including distinctions made by the Allahabad High Court and other judicial bodies.

However, the authority concluded that the applicant failed to disclose ongoing investigations, which constituted suppression of material facts. The ruling referenced Section 104 of the CGST Act, 2017, which allows for an advance ruling to be declared void if obtained by fraud or suppression of facts.

Conclusion:
The GAAR order dated 20.01.2021 was declared void ab initio under Section 104 of the CGST Act, 2017, due to the suppression of material facts by the applicant. The ruling emphasized that the applicant was aware of the ongoing investigations and had already paid differential GST, thus invalidating their claim of no pending proceedings at the time of the advance ruling application.

---