Since Investigation By DGGI Started Prior To Filing Of Application, AAR Order Is Invalid : Andhra Pradesh High Court

The bench of Justices U. Durga Prasad Rao and T. Mallikarjuna Rao noted that the proviso to Section 98(2) puts an embargo on the authority of the AAR to admit an application where the question raised in the said application is already pending or decided in any proceedings under the CGST/APGST Act.

Thus, the Court concluded that since before the date of filing of an application before the AAR, the Directorate General of GST Intelligence (DGGI) had already commenced investigation under the GST Act against the petitioner/applicant, the order passed by the AAR was vitiated by law.

The petitioner, M/s Master Minds, is an educational institution engaged in providing coaching in various professional courses, including Chartered Accountancy (CA). The petitioner filed an application before the Authority for Advance Ruling (AAR) seeking a ruling as to whether the coaching/ training provided by it to its students fell within the term ‘education’ so as to be eligible for exemption of GST under Entry No.66(a) of Notification No.12/2017-CT(Rate), dated 28.06.2017. The AAR held that the petitioner/ applicant was not eligible for exemption. Against this, the petitioner filed an appeal before the Appellate Authority for Advance Ruling (AAAR), who confirmed the order passed by the AAR.

The petitioner filed a writ petition before the Andhra Pradesh High Court, seeking to set aside the order of the AAR and the AAAR.

The petitioner, Master Minds, argued that even before the date of filing the application before the AAR, its registration under the GST Act was already cancelled. Further, the Director General of Goods and Service Tax Intelligence (DGGI) had initiated investigation against the petitioner and enquired about the payment of GST. The petitioner had given the statement that no tax on the educational services were submitted by it. Thereafter, the DGGI issued summons to the petitioner.

The petitioner added that in view of the proviso to Section 98(2) of the CGST Act, the AAR cannot admit an application where the question raised in the application is already pending or is decided in any proceedings under the CGST Act, in the case of the applicant.

The petitioner, Master Minds, contended that the word ‘any proceedings’ in the proviso to Section 98(2), includes within its ambit investigation also. Thus, since investigation proceedings were pending against the petitioner, the AAR could not have accepted petitioner’s application, it averred. In support of its arguments, the petitioner referred to the provisions of Section 70 of the APGST Act.

Referring to the proviso of Section 98(2), the Court reckoned that the proviso puts an embargo on the authority of the AAR 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 noted.

Perusing Section 70 of the APGST Act, the Court observed that the proper officer under the APGST Act has the power to summon any person to give evidence or to produce a document in any inquiry, in the same manner as provided in the case of a civil court under the Code of Civil Procedure, 1908 (CPC). Further, the said enquiry shall be deemed to be judicial proceedings within the meaning of Sections 193 and 228 of the Indian Penal Code, 1860 (IPC).

Thus, the bench concluded that the proceedings conducted by the investigating authority under the APGST Act shall be deemed to be judicial proceedings 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 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.

Thus, the High Court concluded that the term ‘any proceedings’ referred to in the proviso to Section 98(2), encompasses within it the investigation initiated against the applicant under the SGST/CGST Act.

“Thus, the above jurisprudence tells us that any proceedings referred to in 98(2) proviso encompasses 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 said.

Referring to the facts of the case, the Court concluded that investigation was commenced even prior to the filing of the application by the petitioner before the AAR.

Holding that in view of the proviso to Section 98(2), the AAR should not have admitted the application and issued a ruling, the Court ruled that the order passed by the AAR was vitiated by law.

Noting that the petitioner had challenged the AAR’s order before the Appellate Authority on the ground that it was hit by Section 98(2), the Court noted that the appellate authority had, however, failed to give its finding on the same. Therefore, the order of the appellate authority was also vitiated by law, the bench said.

“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 law without being influenced by the orders passed by the ARA and appellate authority.”

The Court thus allowed the writ petition and set aside the orders passed by the AAR and AAAR.

Case Title: M/s Master Minds versus AAAR (GST)

Dated: 23.11.2022

Counsel for the Petitioner: Mr Y. Sreenivasa Reddy

Counsel for the Respondent: Mr Suresh Kumar Routhu, Senior Standing Counsel for CBIC & Government Pleader for Commercial Tax

Citation: 2023 LiveLaw (AP) 6

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