2024 (2) TMI 896 - AAR - GST

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

In Re: M/s. I-tech Plast India Pvt. Ltd.,

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 ... Scope of Advance Ruling - Validity of Ruling dated 20/01/2021 - Investigation proceedings were ongoing - Appropriate classification & rate of GST applicable - supply of plastic toys under CGST & SGST - claim of ITC in relation to CGST-IGST separately in debit notes issued by the supplier in the current financial year i.e. 2020-21, towards the transactions for the period 2018-19 - whether a person who is chargeable with tax and who opts to pay the differential duty along with interest for whatever reasons, can the applicant post such payment claim that no proceedings under the Act were initiated/pending against him? - HELD THAT:- The proceedings were initiated against the applicant were never disclosed to the authority. In-fact, in the personal hearing dated 8.5.2023, the applicant on being asked informed that the said fact was not informed to the authority. In view thereof, the aforementioned GAAR order dated 20.1.2021 is void in terms of section 104 of the CGST Act 2017 on non-disclosure of fact of pendency of proceedings. Our view is also substantiated by the below mentioned findings. Proviso to section 98(2), ibid, clearly states that the AAR 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 of this Act; that the rejection of the application will be only after providing a reasonable opportunity and that the reasons for such rejection shall be specified in the order. Pending proceedings is not defined under the CGST Act, 2017. However, the issue is no longer res Integra having already been decided by various fora - The Hon’ble High Court of Andhra Pradesh in the case of M/S MASTER MINDS VERSUS APPELLATE AUTHORITY FOR ADVANCE RULING (GST), COMMISSIONER OF CENTRAL TAX, COMMISSIONER OF STATE TAX, UNION OF INDIA, STATE OF ANDHRA PRADESH [2022 (12) TMI 1029 - ANDHRA PRADESH HIGH COURT] has held 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. Section 104, ibid, spells out the circumstances which would render the advance ruling to be void. The situations stipulated arc when a ruling under 98(4) has been obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, section 104, ibid, states that the authority may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the applicant as if such Advance Ruling had never been made. The Hon’ble Andhra Pradesh High Court has already held that when investigation has already commenced prior to the filing of application, the Advance Ruling Authority shall not admit the application as per proviso to sub-section (2) of Section 98. In this case, the facts reveal that the applicant was aware of the fact DGGI Pune was conducting an investigation and in agreement where to the applicant had without protest paid the differential duty. Post this, the applicant cannot feign ignorance more so since they had deposited a huge sum as differential duty, which is mentioned in the Incident Report issued by DGGI. The ruling by GAAR vide its Order No. GUJ/GAAR/R/10/2021 dated 20.01.2021 [2021 (4) TMI 558 - AUTHORITY FOR ADVANCE RULING, GUJARAT] was obtained by the applicant by suppression of material facts and misrepresentation of facts and is therefore clearly hit by section 104 of the CGST Act, 2017 - the said order is termed as void in terms of section 104 of the CGST Act, 2017. 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.