2021 (8) TMI 837 - AAR - GST

Validity of Advance ruling - Obtaining ruling by suppression of facts - Investigation proceedings were pending - Ruling in IN RE M/S. SHALBY LIMITED, 2021 (4) TMI 557 - AUTHORITY FOR ADVANCE RULING, GUJARAT - Validity of Sr. No 17 of subject Application FORM GST ARA-01 filed on 2.12.2020 for obtaining the Advance Ruling - whether the stated Advance Ruling may be declared Void Abinitio under Section 104, CGST Act or otherwise? - HELD THAT - The Questions raised in Advance Ruling Application dated 2-12-20 and the issue pending vide Investigation initiated vide Section 70(1) and three GST DRC-01A Part A all dated 11-2-20 are the same - the applicant was aware of the investigation initiated and the proceedings initiated vide three GST DRC-01A Part A all dated 11-2-20. Yet it chose not to declare the same in the Advance Ruling Application dated 2-12-20 and mis-declared at said Sr. No. 17 Form GST ARA-01 dated 2-12-2020 of the said application. We notice that even the Revenue did not bring this misdeclaration by the applicant before the Authority prior to issuance of Ruling dated 20-1-21. However this does not shirk away the responsibility cast on the applicant. The matter at present is not appeal issue as prescribed at section 100 of CGST Act, but the matter at hand to decide whether the Ruling may be declared void abinitio as prescribed at section 104 of the CGST Act. The Authority has been empowered vide Section 104 of CGST Act to declare a Ruling void abinitio . We hold that the Advance Ruling cannot be used as a mechanism to nullify and frustrate the inquiry proceedings already initiated vide section 70(1) of CGST Act. The applicant should bear in mind that the CGST Act has deemed this Authority to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority shall be deemed to be judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code. The applicant has obtained said Advance Ruling dated 20-1-21 by suppressing the material facts. It is declared that Advance Ruling in IN RE M/S. SHALBY LIMITED, 2021 (4) TMI 557 - AUTHORITY FOR ADVANCE RULING, GUJARAT is void ab-initio in terms of Section 104 of CGST Act.

Summary

Issues Involved:
1. Whether the Advance Ruling dated 20-01-2021 may be declared void ab initio under Section 104 of the CGST Act.
2. Whether the proceedings initiated by the Revenue prior to the application for Advance Ruling constitute "proceedings" under Section 98(2) of the CGST Act.

Comprehensive, Issue-wise Detailed Analysis:

Issue 1: Whether the Advance Ruling dated 20-01-2021 may be declared void ab initio under Section 104 of the CGST Act.

The applicant argued that they had not obtained the ruling by fraud, suppression of material facts, or misrepresentation. They contended that the ruling was pronounced after following due procedure and could not be declared void ab initio. They emphasized that Section 98(2) of the CGST Act is applicable only when a show cause notice has been issued or an order has been passed on the question on which the ruling is sought. The applicant maintained that the matter was only under inquiry and investigation, and no show cause notice had been served till date. They relied on various judgments and a CBIC Circular to support their claim that an investigation does not fall within the ambit of "proceedings" for the purpose of Section 98(2).

However, the Authority found that the applicant had mis-declared in their Advance Ruling Application that no proceedings were pending or decided with respect to the questions raised. The Authority noted that the Revenue had initiated access to business premises under Section 71 of the GGST Act, which was converted into search proceedings under Section 67(2). Additionally, three Form GST DRC-01A Part A notices were issued on 11-02-2020, indicating that proceedings were indeed pending. The Authority held that the applicant was aware of these proceedings but chose not to disclose them, thereby suppressing material facts. Consequently, the Authority declared the Advance Ruling void ab initio under Section 104 of the CGST Act.

Issue 2: Whether the proceedings initiated by the Revenue prior to the application for Advance Ruling constitute "proceedings" under Section 98(2) of the CGST Act.

The Authority examined whether the investigation and the issuance of GST DRC-01A Part A notices constituted "proceedings" under Section 98(2). The applicant argued that an investigation does not fall within the ambit of "proceedings" and relied on the decision of the Allahabad High Court in M/s. G.K. Trading Company v. UOI & Others, which held that the word "inquiry" in Section 70 is not synonymous with "proceedings" in Section 6(2)(b) of the CGST Act.

The Authority, however, distinguished the facts of the present case from the referred case law. It held that the investigation initiated under Section 71 of the CGST Act and the issuance of GST DRC-01A Part A notices are proceedings within the meaning of Section 98(2). The Authority emphasized that the term "proceedings" is comprehensive and includes any audit, examination, investigation, claim, contest, dispute, litigation, or other proceeding with respect to taxes. The Authority concluded that the investigation and the issuance of GST DRC-01A Part A notices were steps in a prescribed course of action for enforcing a legal right, thereby constituting "proceedings."

Findings:

1. The Authority held that the investigation initiated under Section 71 and the issuance of GST DRC-01A Part A notices were proceedings under Section 98(2) of the CGST Act.
2. The applicant was aware of these proceedings but chose not to disclose them in their Advance Ruling Application, thereby suppressing material facts.
3. The Authority declared the Advance Ruling dated 20-01-2021 void ab initio under Section 104 of the CGST Act.

Conclusion:

The Advance Ruling dated 20-01-2021 was declared void ab initio due to the suppression of material facts by the applicant, as the investigation and the issuance of GST DRC-01A Part A notices constituted "proceedings" under Section 98(2) of the CGST Act. The Authority emphasized that the Advance Ruling mechanism cannot be misused to nullify or frustrate ongoing inquiry proceedings.