The Karnataka Appellate Authority of Advance Ruling (AAAR) while upholding the AAR’s ruling dismissed the application as an investigation by the Directorate of Goods and Service Tax Intelligence (DGSTI) was already initiated.
The applicant, Tirumala Milk Products Pvt. Ltd. is engaged in processing and manufacturing of Milk & Milk products in the state of Andhra Pradesh. The Applicant processes various Milk and Milk products including flavoured milk. The applicant is carrying on the activity of selling the above said products in the State of Karnataka.
The applicant sought the advance ruling on the issue whether flavoured Milk is taxable at the rate of 5% under Schedule-IV of GST Act.
However, the Karnataka AAR rejected the application as “inadmissible” in terms of the first proviso to Section 98(2) of the CGST Act, 2017 in as much as an investigation had already been initiated by the Directorate of GST Intelligence, Bangalore Zonal Unit.
The Appellant was aggrieved by the grounds on which the lower Authority has refused to admit the application for advance ruling which is that, the question on which the ruling was sought is a matter that is being investigated by the Directorate of GST Intelligence and hence the application cannot be admitted in terms of the proviso to Section 98(2) of the CGST Act.
The Appellant argued that it is only when the same question is being investigated by the concerned officer that the provisions of the proviso to Section 98(2) will apply and investigations conducted by any other agency will not attract the said proviso.
The Appellant has gone into great length in analyzing the intention of the legislature in framing the provisions of Section 98 and has put forth the view that it is only proceedings which are pending before the “concemed/jurisdictional officer’ which qualify for rejection in terms of the proviso to Section 98(2).
The AAAR consisting of D.P.Nagendra Kumar and M.S.Srikar observed that the use of the phrase “any proceedings” in the first proviso to Section 98(2) encompasses within its fold proceedings pending either before the concerned/jurisdictional officer or before any investigative agency such as DGSTI. It was further noted that the statement recorded by the DGSTI pursuant to the summons issued, deals mainly with the classification and rate of tax of the product “Flavoured Milk”. Therefore, the Authority agreed with the decision taken by the lower Authority that the application for advance ruling is inadmissible in terms of the provisions of Section 98(2) of the CGST Act.
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