Advance Ruling can't be used as a mechanism to nullify Inquiry proceedings initiated under CGST Act: AAR [Read Order]

The Authority for Advance Ruling (AAR), Gujarat bench has held that the Advance Ruling cannot be used as a mechanism to nullify and frustrate the inquiry proceedings already initiated vide section 70(1) of Central Goods and Services Tax (CGST) Act.

The applicant, V.L.Traders challenged the DGGI investigation initiated against the applicant vide Search Authorization and that DGGI had initiated summon proceeding to Shri Vipul Laljibhai Dobariya and his statement was recorded for all the three firms M/s VL Traders, M/s JK Foods, and M/s JK Snacks. Shri Dobariya is the proprietor of M/s VL traders and he is a Partner in M/s JK Foods and M/s JK Snacks. Amidst the inquiry, the applicant approached the AAR bench seeking clarification on the rate of tax and classification of goods.

The two-member bench comprising Mr. Sanjay Saxena and Mr. Arun Richard found that the subject inquiry initiated under Section 70(1) of the CGST Act 2017 by the DGGI on the applicant is a judicial proceeding and it was initiated under Section 70(1) of the CGST Act 2017 by the DGGI on the applicant is a judicial proceeding.

“The applicant should bear in mind that the CGST Act has deemed this Authority to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code. We note that an Admission order no GUJ/GAAR/ADM/2020/112 dated 30-12-2020 was issued earlier, admitting the subject application and it was stated in the Admission order itself that as the applicant has made a declaration that the question raised in the application is not already pending or decided in any proceedings in their case under any of the provisions of the Act and that nothing contrary to this declaration was found by the Authority, the application was, earlier, held as maintainable. We note that no Ruling has been pronounced by the Authority with regard to the subject application but for the said interim Admission order,” the bench said.

While dismissing the application, the bench also held that “we are of the view that the usage of the words “any proceeding” in the proviso to Section 98(2) of the CGST Act will encompass within its fold the following investigation proceedings launched by the DGGI under Section 70 of CGST Act. The applicant has contravened the provision of Section 98(2), CGST Act, in so much that it mis-declared that it had no proceedings pending under any provisions of the Act, with an intention to fraudulently obtain Ruling and frustrate the proceedings initiated by DGGI, for the Question raised in the subject Application dated 5-3-20 and issue for which Investigation was initiated vide Section 70(1) of CGST Act, 2017 by DGGI are the same.”

To Read the full text of the Order CLICK HERE

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