2025 (8) TMI 552 - AAAR - GST

Advance Ruling Rejected Under Sections 98(2) and 104 CGST Act for Nondisclosure of Material Facts

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

The AAAR Gujarat upheld the rejection of the appellant's application for an advance ruling under Sections 98(2) and 104 of the CGST Act, 2017. The ... Classification of supply - applicable rate of GST - supply of plastic toys - 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 - suppression of material facts & mis representation of facts or not - HELD THAT:- From the perusal of the relevant statutory provisions, viz Section 98(2) and Section 104 of the CGST Act, 2017, it is seen that Section 98(2) enjoins the meeting of a certain threshold before which an application for advance ruling is considered. Once that threshold is crossed, the mandate of Section 104 comes into the picture which enjoins the applicant to disclose all the material facts before the Advance Ruling authority for it to take a considered view. Appellant have failed to cross the bar of Section 104 of CGST Act, 2017, as they have withheld crucial information from the Advance Ruling authority. In the instant case, it is already held that material facts were withheld from the Advance Ruling Authority in this case warranting declaration of the Advance Ruling to be void in terms of the provisions of Section 104 of the CGST Act, 2017. Appeal rejected. ISSUES: Whether the classification and applicable GST rate on supply of plastic toys is correctly determined under the CGST and SGST Acts.Whether Input Tax Credit (ITC) can be claimed in relation to CGST and IGST separately in debit notes issued in the current financial year for transactions of a previous financial year.Whether an Advance Ruling obtained by an applicant can be declared void ab initio under Section 104 of the CGST Act, 2017 on grounds of suppression of material facts or misrepresentation.Whether the existence of investigation or inquiry by the Directorate General of GST Intelligence (DGGSTI) amounts to 'pending proceedings' under the CGST Act for the purpose of filing an Advance Ruling application.Whether non-disclosure of ongoing investigation or payment of differential tax to the Advance Ruling Authority constitutes suppression of material facts.Whether the jurisdiction of DGGSTI Pune to conduct inquiry is valid under the CGST Act, 2017.Whether failure to provide certain departmental documents to the appellant prejudices the principles of natural justice. RULINGS / HOLDINGS: The classification of plastic toys under the First Schedule to the Customs Tariff Act, 1975 is 95030030, attracting GST at the rate of 12% (6% CGST + 6% SGST).The applicant cannot claim Input Tax Credit separately in relation to CGST and IGST for debit notes issued in the current financial year towards transactions of a previous financial year.The Advance Ruling dated 20.1.2021 was correctly declared void ab initio under Section 104 of the CGST Act, 2017, as it was obtained by suppression of material facts and misrepresentation of facts.The existence of investigation or inquiry by DGGSTI, coupled with payment of differential tax and interest, amounts to 'pending proceedings' under the CGST Act, 2017 for the purpose of filing an Advance Ruling application.Non-disclosure of the ongoing investigation and payment of differential tax to the Advance Ruling Authority constitutes suppression of material facts, as these facts were directly related to the question raised before the Authority and were not disclosed at the material time.The jurisdiction of DGGSTI Pune to conduct inquiry is valid under Notification No. 14/2017-CT dated 1.7.2017 granting all India jurisdiction to DGGSTI officers.Non-provision of departmental documents such as the incident report and certain letters did not prejudice the appellant's right to natural justice, as the facts contained therein were not denied and copies of relevant correspondence were already in appellant's possession. RATIONALE: The Court applied Sections 98 and 104 of the CGST Act, 2017, which govern the procedure for Advance Ruling applications and the conditions under which a ruling can be declared void if obtained by fraud, suppression, or misrepresentation.The Court emphasized the statutory requirement under Form GST ARA-01 that applicants must declare whether any question raised is pending or decided in any proceedings under the Act, placing the onus on the applicant to disclose material facts.The Court interpreted 'proceedings' to include ongoing investigations or inquiries when coupled with actions such as payment of differential tax and interest, thereby triggering the proviso to Section 98(2) that bars admission of applications where questions are pending in proceedings.The Court rejected the appellant's argument that investigation or inquiry does not amount to proceedings, holding that the factual matrix-payment of differential tax and interest and subsequent issuance of SCN-demonstrated pending proceedings.The Court noted that reliance on case law cited by the appellant was misplaced because such precedents did not consider the interpretation of Section 104 of the CGST Act, 2017, and many related to different statutory contexts or provisional attachment, which is distinct from the present facts.The Court followed the principle from Collector of C. EX., Calcutta vs Alnoori Tobacco Products that judicial precedents must be applied with regard to their factual context and cautioned against blind reliance on precedents without factual similarity.The Court acknowledged that the jurisdiction of DGGSTI is established by statutory notification and thus dismissed the appellant's jurisdictional challenge.The Court found that non-supply of internal departmental documents did not violate natural justice as these documents were internal and the appellant was not prejudiced since the facts were undisputed.The Court concluded that the appellant failed to disclose material facts to the Advance Ruling Authority, warranting the ruling to be declared void under Section 104, and accordingly dismissed the appeal.