2020 (3) TMI 73 - AAAR - GST

Maintainability of application for advance ruling - Classification of goods - Flavoured Milk - contention is that the application filed by the respondent KCMPFL should not have been admitted by the Authority in terms of the proviso to Section 98 (2) of the CGST Act since an investigation was already pending against them on the same issue of classification of Flavoured Milk by the Directorate General of GST intelligence, Bangalore Zonal Unit(DGGI) - challenge to AAR decision. HELD THAT - Sec. 98(2) provides that the application shall not be admitted where the question raised is already pending under any of the provisions of this Act. It is clear from the record submitted by the Appellant Department that proceedings were pending against KCMPFL before the DGGI and the issue taken up by the DGGI in the proceedings related to the classification of the Flavoured Milk - whether under Chapter heading 2202 99 30 or under 0402 99 90 - the respondent KCMPFL made an application for advance ruling on 20th March 2019 all the while being aware of the investigation being conducted against them by the DGGI, Bangalore. The respondent KCMPFL chose to keep this fact away from the Authority for Advance Ruling at the time of filing the application. The application for advance ruling could not have been made in this case as it is hit by the provisions of Section 98 (2) of the CGST Act in as much as an investigation was already initiated against them by DGGI on the very same issue that was raised before the Authority for Advance Ruling. The order of the lower Authority is void ab initio as it was vitiated by the provisions of Section 98(2) of the CGST Act - Appeal allowed.

Summary

Issues:
Classification of Flavoured Milk under HSN codes 0402 99 90 or 2202 99 30. Validity of the ruling obtained by suppression of material facts during an ongoing investigation by DGGI.

Classification Issue Analysis:
The case involved a dispute regarding the classification of Flavoured Milk under HSN codes 0402 99 90 or 2202 99 30. M/s. KCMPFL argued that Flavoured Milk should be classified under 0402 99 90 based on FSSAI definitions. The Authority for Advance Ruling agreed with this classification. However, the Department contended that under the Central Excise regime, Flavoured Milk was classified under heading 2202, and KCMPFL changed the classification under GST to benefit from a lower tax rate. They cited judicial rulings and HSN notes to support their argument that Flavoured Milk falls under 2202 99 30, attracting a higher GST rate of 12%.

Validity of Ruling Issue Analysis:
The Department raised concerns about the validity of the ruling obtained by KCMPFL, alleging suppression of material facts during an ongoing investigation by the DGGI. The Department argued that the application for advance ruling should not have been admitted as investigations were initiated by the DGGI on the same issue of classification of Flavoured Milk. The Authority found that KCMPFL had indeed filed the application while being aware of the investigation, thereby violating Section 98(2) of the CGST Act. Consequently, the Authority held the ruling as void ab initio due to the suppression of material facts during the ongoing investigation.

Judgment Summary:
The Appellate Authority for Advance Ruling declared the ruling obtained by KCMPFL as void ab initio due to the suppression of material facts during an ongoing investigation by the DGGI. As a result, the Authority did not provide a ruling on the classification issue, stating that the matter is pending in a proceeding under the Act. The Department's appeal was allowed, and the original ruling was declared void, emphasizing the importance of disclosing all relevant information during the application process for advance rulings.