Investigation initiated after filing of application cannot be a bar in admitting the advance ruling application 

Facts: –

• The Petitioner is a private limited company incorporated under the Companies Act, 1956 and is engaged in the business of undertaking works contract mostly with Central and State Governments.
• That as per the view of the petitioner the rate of GST for works contract undertaken with the Central Government Employees Welfare Housing Organisation would be 18% (CGST 9% + SGST 9%), however, according to Central Government Employees Welfare Housing Organisation, GST would be payable at the rate of 12% (CGST 6% + SGST 6%).
• That with the said view Central Government Employees Welfare Housing Organisation paid GST at the rate of 12%, and deducting the same payment was made to the petitioner. This caused loss to the petitioner besides being susceptible to the charge of underpaying GST.
• The Petitioner to support its view, filed an application before the Advance Ruling Authority on 11.05.2019 with a question as to what would be the rate of tax on works contract services rendered by it to the Central Government Employees Welfare Housing Organisation.
• However, there was undue delay in providing advance ruling, in the meanwhile a notice dated 15.12.2021 was issued to the petitioner by Directorate General of GST Intelligence (DGGI), Hyderabad Zonal Division alleging short payment of GST, and the same was followed by issuance of summons to the Managing Director of the petitioner with the directions to appear before DGGI.
• That after a long period of three years, a notice was issued to the petitioner by the Advance Ruling Authority scheduling the personal hearing on 27.04.2022 and the same was duly attended by the Authorized Representative of the petitioner, however, by the impugned order dated 03.06.2022, the application for advance ruling was rejected.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the law applicable, observed that Chapter XVII of the CGST Act deals with advance ruling. Sections 95 to 106 form part of Chapter XVII.
• The Hon’ble Court discussing and after perusal of provisions of Section 95(a), Section 97(2), Section 100(1), Section 101(C), Section 96, Section 97 & 98, found that sub section (2) of Section 98 prescribes that the Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application.
• It was found that proviso to Section 98(2) states that ‘the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of the applicant under any of the provisions of the CGST Act.’ Further as per sub-section (4) where an application is admitted under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the authority and after providing an opportunity of being heard to the applicant or his authorised representative as well as to the concerned officer or to his authorised representative, pronounce its advance ruling on the question specified in the application.
• It was found by the Hon’ble Court that it is quite evident that the Authority shall not admit an application for advance ruling where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the CGST Act. Further the word ‘proceedings’ is neither defined in Chapter XVII nor in Section 2 of the CGST Act, however, if it is understood in the context in which it is being applied, it would mean proceedings where the question raised in the application for advance ruling has already been decided or is pending decision. Therefore, inquiry or investigation would not come within the ambit of the word “proceedings”
• That in the present case, there is no dispute that the Advance Ruling application was filed on 11.05.2019 and from the perusal of impugned order dated 03.06.2022, it is clear that the notice dated 15.02.2021 was issued much after the filing of advance ruling application. Thus, the same cannot be a bar under the first proviso to sub-section (2) of Section 98 of the CGST Act and the question of informing the Authority about the enquiry initiated by DGGI did not arise as the application was filed much prior to initiation of enquiry.
• Thereafter, the Hon’ble Court considering the order passed by the Telangana State Authority for Advance Ruling referred on the behalf of the petitioner, in A.R. Com/28/2021, the moot point is that the application for advance ruling in that case was filed on 11.07.2020 subsequent to which in August 2020, DGGI had initiated investigation on the question raised by the applicant. In that case, Telangana State Authority for Advance Ruling held that such investigation post filing of application would not debar the applicant from seeking advance ruling and accordingly advance ruling was granted.

 With the above, the Hon’ble Court found that the Telangana State Authority for Advance Ruling was not justified in rejecting the application of the petitioner, thus, quashed and set aside the impugned order dated 03.06.2022 with the directions to the Authority to take up the application dated 11.05.2019 filed by the petitioner and pass an appropriate order under Section 98(4) after affording opportunity of hearing to the petitioner.

To read the complete judgment 2022 Taxo.online 836