The Appellate Authority for Advance Ruling, Tamil Nadu in the case of M/S. TAMILNADU MEDICAL COUNCIL in Order No. A. R. Appeal No. 07/2024/AAAR, Order-in-Appeal No. AAAR/12/2025 (AR) dated 10.01.2025, has ruled that the Advance Ruling Authority, Tamil Nadu has correctly rejected the application based on procedural grounds. They upheld the rejection, affirming that the existence of an ongoing investigation precludes an advance ruling.

Facts of the Case: The Appellant approached the Authority for Advance Ruling (AAR), Tamil Nadu, seeking clarification on the applicability of GST on various fees collected by it. However, the AAR rejected the application under Section 98(2) of the CGST Act, 2017, citing that an investigation by the Directorate General of GST Intelligence (DGGI) was already in progress, and therefore, the matter was already a “proceeding.”

Further, they challenged the rejection before the Appellate Authority for Advance Ruling, Tamil Nadu , which initially remanded the case back to the AAR for a fresh ruling after ensuring the principles of natural justice were followed. The AAR, upon rehearing the matter, once again rejected the application under Section 98(2), leading to the present appeal before the AAAR. 

The Appellant argues that a mere investigation or inquiry does not amount to a “proceeding” unless it results in a Show Cause Notice (SCN) or an Order, as held by various High Courts and the Supreme Court. Reliance placed upon Gujarat AAAR decision in Shalby Limited, where it was held that Section 98(2) applies only when a Show Cause Notice (SCN) has been issued or an order has been passed. An investigation does not fall within the meaning of a “proceeding”.

Issue:  Whether a mere summons under Section 70 of the CGST Act constitutes a “proceeding” under the meaning of Section 98(2), which would bar the AAR from issuing a ruling. 

AAR Rulings:  The AAR ruled that the summons issued by DGGI under Section 70 of the CGST Act amounts to the initiation of a proceeding and thus rejected the application under Section 98(2) proviso, which prevents the AAR from ruling on matters already under inquiry. The AAR placed reliance upon decision of Andhra Pradesh High Court in the case of Masterminds, which observed that a summon under Section 70 is the commencement of an investigation/proceeding under the CGST Act.

AAAR Rulings: The AAAR, Tamil Nadu observed and ruled as under:

The term “proceedings” under Section 98(2) is broad, encompassing investigations, inquiries, assessments, and other actions under the CGST Act. The presence of an ongoing investigation by DGGI-South, Chennai, at the time of filing the advance ruling application precludes its admission per the first proviso to Section 98(2).

The appellant relied on Liberty Union Mills v. Union of India and Radha Krishan Industries v. State of Himachal Pradesh. The AAAR rejected their applicability, stating these cases dealt with different legal contexts such as provisional attachment u/s 83 CGST Act, which has a more limited definition of “proceedings.” Further, The Telangana High Court in M/s Srico Projects (P) Ltd. supported the appellant’s view, stating that inquiry or investigation does not amount to “proceedings.” However, the Andhra Pradesh High Court in M/s Master Minds ruled that an investigation is a proceeding under Section 98(2), thereby supporting rejection of the advance ruling application.

The AAAR stated that when two High Courts provide conflicting interpretations, the authority may adopt the more logical view. The AAAR preferred the Andhra Pradesh HC ruling in M/s Master Minds, which held that any investigation, if already started, bars the admission of an advance ruling application.

The AAAR upheld the rejection of the advance ruling application, since a prior investigation was already in progress before the advance ruling application was filed, the first proviso to Section 98(2) applied, barring admission of the application.