AP HC Invalids AAR Order as DGGI Investigation Started Before Application Filing

The Andhra Pradesh High Court held that the term ‘any proceedings directed to in the proviso to Section 98(2) of the CGST Act/ Andhra Pradesh GST act (APGST Act) that consists within its boundary the analysis executed against the petitioner beneath the mentioned act.

The bench consists of Justices U. Durga Prasad Rao and T. Mallikarjuna Rao cited, the proviso to section 98(2) places the prohibition on the head of AAR to consider the application in which the query asked in the specified application would already be due or decided in any proceedings beneath the CGST/APGST act.

Hence the court attained the conclusion, as prior to the filing date of the application to AAR, the Directorate General of GST Intelligence (DGGI) would have already started doing an investigation beneath the GST against the applicant, The legislation invalidated the AAR’s decision.

The applicant, M/s Master Minds, is an institution that offers tutoring for a variety of professional programs, including Chartered Accountancy (CA). Towards the Authority for advance ruling (AAR) the applicant has furnished the application asking for the ruling that if requesting a ruling on whether the coaching and training it offered to its students qualified as “education” under Entry No.66(a) of Notification No.12/2017-CT(Rate), dated 28.06.2017, in order to be free from GST. According to the AAR, the petitioner or applicant was not qualified for an exemption. The petitioner appealed this to the Appellate Authority for Advance Ruling (AAAR), who upheld the decision made by the AAR.

The petitioner requested the Andhra Pradesh High Court to annul the AAR and AAAR’s ruling in a writ case.

Master Minds, the petitioner, claimed that its registration under the GST Act had already been revoked even before the date the application was filed with the AAR. Additionally, the petitioner was the subject of an inquiry by the Director General of Goods and Service Tax Intelligence (DGGI), who also sought information on GST payments. The petitioner had stated that it had not remitted any taxes for the educational services. The DGGI then served a summons on the petitioner.

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The petitioner continued by pointing out that, in light of the proviso to Section 98(2) of the CGST Act, the AAR cannot allow an application where, in the instance of the applicant, the issue stated in the application is already ongoing or has been resolved in any proceedings under the CGST Act.

The petitioner, Master Minds, argued that the phrase “any proceedings” in Section 98(2)’s proviso included investigation as well. It said that the AAR was thus unable to accept the petitioner’s application since inquiry processes against the petitioner were still ongoing. The petitioner used the provisions of Section 70 of the APGST Act in support of its claims.

The Court noted the proviso of Section 98(2) and determined that it places a restriction on the AAR’s ability to admit an application. “The said embargo says that where the questions raised in the application are already pending or decided by any proceedings in the case of an applicant under any of the provisions of the CGST/APGST Act, the authority shall not admit the application,” the Court remarked.

Reading Section 70 of the APGST Act, the Court noted that, similarly to how a civil court is to be handled under the Code of Civil Procedure, 1908 (CPC) the proper officer under the APGST Act has the authority to call any individual to deliver testimony or to produce a document in any inquiry. Additionally, the aforementioned investigation shall be considered judicial proceedings for the purposes of Sections 193 and 228 of the Indian Penal Code, 1860. (IPC).

The bench came to the conclusion that the APGST Act’s investigative authority’s investigations should be treated as judicial investigations under the CGST/APGST Act.

The Court took note that in the case of Appellate Authority for Advance Ruling (AAAR), Karnataka v. M/s. Karnataka Co-operative Milk Producers Federation Limited (2020), the AAAR had ruled that since the investigation against the applicant was already initiated by the DGGI on the very same issue that was raised before the AAR, the application seeking advance ruling was hit by the provisions of Section 98 (2) of the CGST. The AAAR had thus held that the ruling obtained by the applicant was void ab initio.

The High Court came to the conclusion that the inquiry started against the applicant under the SGST or CGST Act is included in the term “any proceedings” referred to in the proviso to Section 98(2).

“Thus, the above jurisprudence tells us that any proceedings referred to in 98(2) proviso encompass within it the investigation against the applicant as per the provisions of CGST/APGST Act and if by the date of filing of the application before the ARA, already such proceedings were commenced, the ARA shall not admit the application inviting advance ruling,” the Court stated.

According to the case’s circumstances, the court came to the conclusion that the inquiry had started even before the petitioner had submitted his application to the AAR.

The Court concluded that the AAR’s order was invalid under the law, holding that given the proviso to Section 98(2), the AAR should not have accepted the application and made a decision.

The petitioner had appealed the Appellate Body’s decision on the AAR’s ruling on the grounds that it violated Section 98(2), but the Court noted that the appellate authority had not made a determination about this issue. The bench concluded that this rendered the appellate authority’s decision invalid under the law.

“Accordingly, this writ petition is allowed and the order dated 05.03.2020 of ARA and order dated 28.09.2020 of the appellate authority are set aside and the petitioner is given liberty to appear before the appropriate authority and submit his explanation and to take all factual and legal pleas that are permissible under law and the said authority shall consider and proceed in accordance with the law without being influenced by the orders passed by the ARA and appellate authority.”

As a result, the Court approved the writ petition and set aside the decisions made by the AAR and AAAR.