The Hon’ble High Court of Andhra Pradesh vide its order dated 23.11.2022 in the matter of M/s Master Minds Vs. Appellate Authority For Advance Ruling & Others in Writ Petition No. 5571 of 2021, set aside the Advance Ruling Authority & the Appellate Authority For Advance Ruling orders, finding that the investigation has already commenced prior to filing of application and therefore, the Advance ruling authority should not have admitted the application of the assessee and issued its ruling.

The Petitioner filed the writ petition before the Hon’ble High Court praying for declaring the impugned order AAAR/AP/04(GST)2020, dated 28.09.2020, passed by the Appellate Authority for advance ruling as illegal, arbitrary and to set aside the same and pass further appropriate orders.

Facts of the Case: –

• The petitioner is a proprietary concern and a leading educational institution providing coaching to students for obtaining educational qualifications viz., Chartered Accountancy Certificate (‘CA’), Cost and Works Accountancy Certificate (‘ICWA’) and other similar type of professional courses. That the petitioner filed application for advance ruling vide Form GST ARA – 01 (as per Rule 104(1)) of CGST Act seeking ruling on the point whether the coaching/training provided by the applicant for students for the above courses conducted by it fall within the wider meaning of the term ‘education’ and in relation to education and other related aspects.
• The Advance Ruling after considering the facts and circumstances, passed its order – AAR No.08/AP/GST/2020, dated03.2020, wherein it was held by ARA that the applicant/petitioner was not eligible for the exemption under Entry No.66(a) of Notification No.12/2017-CT(Rate), dated 28.06.2017, as amended and the ruling was also given on other related issues raised by the petitioner before it.
• The petitioner being aggrieved of the said ruling, filed an appeal before the Appellate Authority, which was dismissed by the Appellate Authority confirming the order of ARA vide its order dated 09.2020.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that even before the filing of application before ARA on12.2020, the GST Department has already cancelled the registration of the petitioner under GST. Further, the Director General of Goods and Services Tax Intelligence (herein after, ‘DGGSTI’), Visakhapatnam, had called for certain documents and enquired about the payment of GST on the services provided by the petitioner and the petitioner submitted all the required documents and also gave the statement submitting that there was no tax on the educational services provided by them.  In this regard, summons dated 01.07.2019 & 11.09.2019 were issued to the applicant by DGGSTI.
• It was also submitted that the petitioner very clearly mentioned the aforesaid facts in para 11 of its application. It was also brought to the notice of ARA that show-cause notice was not issued and no proceedings through any document were pending against the applicant by the date of his application.
• It was strongly argued that the afore-stated proceedings would indicate that the DGGSTI had already commenced investigation as against the petitioner even before he filed application before ARA. Therefore, in view of Section 98(2), the Advance Ruling Authority should not have admitted the application of the Petitioner in view of the pendency of the proceedings.
• Further, referring to the word ‘any proceedings’ mentioned in the said proviso, it was submitted that it would cover ‘investigation’ also. Hence, when the investigation proceedings are pending against the applicant, the application of such applicant shall not be entertained by the ARA in view of the embargo created in the aforesaid proviso.  To support its argument reference was made to Section 70 of the Act.
• Reliance was placed on the rulings of Appellate Authority in Appellate Authority for Advance Ruling, Karnataka v. M/s.Karnataka Co-operative Milk Producers Federation Limited – 2020 (34) G.S.T.L, 606 (App AAR, Appellate Authority for -GST-Kar), Advance Ruling, Gujarat, v. J.K.Papad Industries – 2022 (57) G.S.T.L. (App., Appellate Authority for Advance Ruling, Maharashtra, v. Arihant Enterprises.
• That it was already informed to ARA that the investigation is pending against the petitioner, the application ought not to have been admitted by the   However, the ARA not only admitted the application but also gave ruling in respect of questions raised by him.
• Referring to Para 5 of the Appellate Authority order, it was submitted that though the contention raised by the petitioner was mentioned, the appellate authority has not given any finding on the said contention and ultimately dismissed the appeal by confirming the order of the ARA.
• It was brought to the knowledge of the Hon’ble Court that subsequent to the disposal of appeal, a show cause notice dated 03.2021was issued by DGGSTI and the petitioner duly filed reply to the same.
• With the above submissions, it was prayed to set aside the order AAR No.08/AP/GST/2020, dated 03.2020, passed by the ARA as well as the order AAAR/AP/04(GST)/2020, dated 28.09.2020 being against the spirit of proviso to Section 98(2), and also give liberty to the petitioner to challenge his case on all the legal and factual grounds which are available to him and the investigating authorities may be directed to consider those grounds without reference to the observations in the order dated 05.03.2020 of the ARA and the order dated 28.09.2020 of the Appellate Authority.

 

On the other hand, writ petition was opposed on the behalf of the respondents, submitting that the order of the appellate authority is perfectly valid.  Therefore, there is no requirement to interfere with the same and writ petition is liable to be dismissed.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the relevant provisions of the Act, found that the main thrust of argument of learned counsel for petitioner is that in view of the commencement of the investigation by the DGGSTI even before the submission of application by the petitioner, the ARA ought not to have admitted his application.
• The Hon’ble Court taking note of the provisions of Section 98 ‘Procedure on receipt of the application’ observed that it can be seen, Section 98(2) of the CGST/APGST says that authority may after examining the application and records called for and after hearing the applicant or his authorized representative, by order, either admit or reject the application. Thus, the subsection (2) says that after hearing the petitioner or his authorized representative, the authority may either admit or reject the application.  However, for admitting the application of the applicant, a qualification is provided in the form of proviso to the said section, which 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 an applicant under any of the provisions in the said Act.  Thus, the proviso puts an embargo on the Authority to admit an application, which states 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.  Further,  it was submitted by the petitioner that the phrase ‘any proceedings’ would also cover investigation.
• The Hon’ble Court taking note of Section 70 referred by the petitioner to support its contention, found that in terms of this section the proper officer under this Act shall have the power to summon any person either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure. Such enquiry referred to in sub-section (1) shall be deemed to be judicial proceedings within the meaning of section 193 and 228 of the Indian Penal Code. Thus, the proceedings conducted by the investigating authority under the provisions of this Act shall be construed as judicial proceedings as per the CGST/APGST Act.
• Thereafter, the Hon’ble Court taking note of the decisions/rulings relied upon by the petitioner in Appellate Authority for Advance Ruling, Karnataka’s case; Appellate Authority for Advance Ruling, Gajarat’s case; Appellate Authority for Advance Ruling, Maharashtra’s case, wherein it was held that if ‘any proceeding’ is pending against the applicant/appellant, the application filed by the appellant could not have been admitted by the Advance Ruling Authority in view of first proviso to sub-section (2) of Section 98 of the CGST Act, 2017.
• From the perusal of the above rulings, it was found by the Hon’ble Court that the jurisprudence tells us that ‘any proceedings’ referred to in 98(2) would also cover ‘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. Further, no contra citations has been referred on the behalf of the respondents.
• Therefore, the Hon’ble Court was of the view that that the ARA should not have admitted the application in the instant case and issued its ruling, and the said order dated 05.03.2020 is vitiated by law. Further, the said fact was brought to the knowledge of the Appellate Authority in the grounds of the appeal, the appellate authority unfortunately has not given any finding on it.
• With the aforesaid discussions, the Hon’ble Court found that the impugned appellate authority order is also vitiated by law, and finding force in the submissions of the petitioner both the orders were set aside.

The Hon’ble Court with the above findings, allowed the writ petition by setting aside the order dated 05.03.2020 of ARA and order dated 28.09.2020, passed by the appellate authority. 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.