M/S.Srico Projects PVT. LTD. vs. Telangana State Authority For Advance Ruling
Original PDF →Facts
The petitioner, M/s. Srico Projects Pvt. Ltd., filed an application for advance ruling on May 11, 2019, seeking clarification on the GST rate applicable to works contract services provided to the Central Government Employees Welfare Housing Organisation. The petitioner contended the rate should be 18%, while the organisation paid 12%, causing a loss to the petitioner and potential GST underpayment charges. Meanwhile, the Directorate General of GST Intelligence (DGGI) issued a letter on February 15, 2021, alleging short payment of GST and subsequently issued summons to the petitioner's Managing Director. After a significant delay, the Telangana State Authority for Advance Ruling (TSAAR) rejected the petitioner's application on June 3, 2022, citing the DGGI investigation as a reason under the first proviso to Section 98(2) of the CGST Act.
Held
The Court held that an inquiry or investigation initiated by the DGGI does not come within the ambit of 'proceedings' as contemplated by the first proviso to Section 98(2) of the CGST Act. The Court reasoned that the term 'proceedings' in this context refers to situations where the question raised in the application for advance ruling has already been decided or is pending decision in a formal legal proceeding against the applicant. The Court noted that the petitioner's application for advance ruling was filed on May 11, 2019, and the DGGI's notice was issued on December 15, 2021, which was subsequent to the filing of the application. Therefore, the DGGI investigation could not be a bar to admitting the application. The Court also relied on a precedent set by the TSAAR itself in a similar case (A.R.Com/28/2021) where a post-application investigation did not preclude the applicant from obtaining an advance ruling. Consequently, the impugned order of the TSAAR rejecting the application was set aside. The TSAAR was directed to reconsider the petitioner's application and pass an appropriate order under Section 98(4) of the CGST Act within two months.
Key Issues
1. Whether the inquiry or investigation initiated by the Directorate General of GST Intelligence (DGGI) constitutes 'proceedings' under the first proviso to Section 98(2) of the Central Goods and Services Tax Act, 2017, thereby barring the admission of an application for advance ruling. Petitioner's arguments: The petitioner argued that an inquiry or investigation does not fall within the ambit of 'proceedings' as contemplated by Section 98(2) of the CGST Act. They further contended that their application for advance ruling was filed on May 11, 2019, significantly before the DGGI issued any notice on December 15, 2021, and therefore, the subsequent investigation could not be a bar. They relied on a previous order of the TSAAR in A.R.Com/28/2021, where a similar situation of post-application investigation did not debar the applicant from seeking an advance ruling. Revenue's arguments: The respondent (DGGI) argued that the petitioner was aware of the DGGI investigation and failed to disclose this fact to the Authority, justifying the rejection of the advance ruling application.
Sections Cited
Section 98, Section 98(2), Section 98(4), Section 70, Section 95, Section 96, Section 97
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Cause title — parties, addresses and appearances
therealter pass appropriate order.
Petitioner is a private limited company incorporated under the Companies Act, 1956. It is engaged in the business of undertaking works contract mostly with the Cyatral and State (]ovcrnments. Petitioner is a registered TTIE HOI'BLE THE CHIEF JUSTICE UJJAL BIIUYAN AND THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
J supplier under the CGST Act and related Acts. According to the petitioner, the rate of GST for works contract undertaken with the Central Government Employees Welfare Housing Organisation would be 18% (CGST 9Zo + SGST 9%). According to Central Government Employees Welfare Housing Organisation, GST would be l2o/o(CGST 6% + SGST 6%). Accordingly, Central Government Employees welfare Housing organisation paid Gsr to the extent of l2o/o aad, after deducting the same made payment to the petitioner. This caused loss to the petitioner besides being susceptible to the charge of underpaying GST. In these circumstances, petitioner submitted an application lor advance ruling on l1.OS.2O19 on the 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 \^,as inordinate delay in providing advance ruling. In the rneanwhile, respondent No.2 issued letter 15.O2.2O21 to the petitioner alleging short payment dated of GST r.e., l2o/o instead of lgo/o. This was followed by issuing of summons to the Managing Director of the petitioner under* I I i
/ 4 .r Section 70 of the CGST Act directing his appearance before respondent No.2 on 05.O1.2022 and issuance of subsequent summons by respondent No.2. 4. After long three years, the Authorit5r issued notice to the petitioner on 25.O4.2022 scheduling personal hearing on 27.04.2022. The authorised representative of the petitioner appeared for such personal hearing and requested the Authority to give a ruling on the question raised by it in the application dated 11.05.2019. By the impugned order dated 03.06.2022, the application for advarnce ruling was rejected. Aggrieved thereby, present writ petition has been filed.
On 2O.06.2022, this Court had issued notice arld had calle'd upon thr: respondents to hle counter affi<lavit.
Ms. Sapna Reddy, learned counsel appearing for respondent No.2 submits that counter affidavit has been filed, a copy o1'which has been placed before us.
From a perusal of the order dated 03.06.2022, we find that thc Teiangana Statc Authority for Advance Ruling (a-lready refcrrcd to as 'the Authority' hereinbefore) noted
5 't l J that Directorate General of GST Intelligence (DGGI), Hyderabad Zonal Division, had initiated enqulry into the business activities of the petitioner and in this connection had issued notice to the petitioner on 15. 12.2021 . Holding that case of the petitioner falls under the Iirst proviso to Section 98(2) of the CGST Act, the Authority rejected the application for advance ruling.
In the counter affidavit, stand taken by respondent No.2 is that DGGI started investigation into the business activities of the petitioner and petitioner knew about such investigation as would be evident from its letter dated 15.12.2021 addressed to DGGI, but this fact was not disclosed. On this basis, decision of the Authority has been justified.
Submissions made have been considered
Chapter XVII of the CGST Act deals with advance ruling. Sections 95 to 106 form part of Chapter XVII. Section 95(a) defines "advance ruling" to mean a decision provided by the Authority or the Appellate Authority or the National Appellate Authority to an applicant on matters or 6 1 I on questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100 or Section l01C in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Section 96 provides that the Authoritl' constituted under the provisions of the State Goods and Services Tax Act or under the Union Territory Goods and Services Tax Act shall be deemed to be the Authority in respect of that State or Union Territory. Whilc Section 97 provides for filing of application for advance ruling, Section 98 lays down the procedure to be followed on receipt of such application. Sub-section (2) o[ Section 98 says 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, b1' order, either admit or reject the application. Proviso thereto says that the Authority shall not admit the application where the qucstion raised in the application 1S already pending or decided in any ( z'proceedings in the case of thc applicant under any of the I provisions of the CGST Act. As pcr sub-section (4.), where
l 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.
From the above, it is seen that the Authority shall not admit an application for advance ruling where tJre 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.
Though the word "proceedings" has neither been defined in Chapter XVII nor in the definition clause i.e., in Section 2 of the CGST Act, if the said word is understood in the context in which it is being applied, namely, any proceedings pending or decided in the case of an applicant under the provisions of the CGST Act, it would mean proceedings where the question raised in the application I ! t
8 I 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"'
Be that as it may, in so far the present case is concerned, there is no dispute to the fact that the petitioner had filed the application for advance ruling on 11.05.2019. From the order dated 03'06'2022, it is evident that notice was issued to the petitioner by DGGI on 15.12.2021 much after filing of the application for advance ruling. In our considered opinion, 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 petitioner informing the Authority that it was being cnquired into did not arise because the application was filed much prior in point of time.
In the hearing, Dr. S.R.R- Viswanath, learned counsel for the petitioner, has placed bcfore us an order dated 14.03.2022 passed by the Telangana State Authority for Advance Ruling in A.R.Com/2812021 wherein thc question raised was whether the sale of produces Distillery Wet r (
9 Grain Soluble ('DWGS,) and Distillery Dry Grain Soluble ('DDGS')-'Cattle feed,undertaken by the appticant would be covered by serial No.l02 of Notilication No.O2/2OlZ dated 24.06.2017 and whether the above commodities were exempt from payment of GST. The ruling given was in the negative holding that both the commodities are taxable at the rate of 57o. But the moot point is ttrat the application for advance ruling in that case was filed on ll.O7.2O2O subsequent to which in August 2020, DGGI had initiated investigation on the question raised by the applicant. In that case, Telangana Statc Authority for Advance Ruling held that such investigation post liling of application would not debar the applicant from seeking advance ruling and accordingly advance ruling was granted.
On due consideration and following the above, we are of the view that rcspondent No. 1 i.e., Telangana State Authority for Advance Ruting was not justified in rejecting the application of the pctitioner vide the order dated 03.06.2022. Accordingl_v the said order dated 03.06.2022 is set aside and quashed. Respondent No.1 is directed to I I I
take on board the application filed by the petitioner on 11.05.2019 and pass an appropriate order thereon under sub-section (4) of Section 98 of the CGST Act after giving due opportunity of hearing to the petitioner. The above exercise shall be carried out within a period of two months from the date of receipt of a copy of this order.
The writ petition is accordingly allowed. Miscellaneous applications pending, if any, shall stand closed. However, there shall be no order as to costs. 1 i l //// One fair copy to the Hon'ble the Chief Justice UJJAL BHUYAN (for His Lordships Kind Perusal) ()ne fair copy to the Hon'ble Sri Justice C.V. BTIASKAR REDDY (for His Lordships Kind Perusal) 1. 11 LR.Copies
The Under Secretary, Union of lndia, Ministry of Law, Justice and Company Affairs, New Delhi
The Secretary, Advocates' Association Library, High Court Buildings, Hyderabad.
Telangana State Authority For Advance Ruling, (Constituted under sec.96(1) of the TGST Acf , 2017), Commercial Taxes Complex, M.J.Road, Nampally, Hyderabad. .
Additional Assistant Director, Directorate General of GST tntelligence, Zonal Unit, House No.1-11-2214, Lane Opp. HDFC Bank, Begumpet, Hyderabad 500 016
One CC to SRl. S R R VISWANATH Advocate [OPUC]
One CC to SRl. B. NARASIMHA SARMA, SC FOR CG [OPUC]
Two CD Copies.
One Spare Copy N. RAJ GOPAL ASSISTANT REGISTRAR i \ - ., -t-r,__---- SECTION OFFICER To, PM GJP q IO
HIGH C:OURT DATED:171O812022 ORDER WP.No.26145 ot 2O22 .z L4ry /,:' P* ti so \ s d.I (ri, H c (, A",/ cai/ ,// Allowing the WP without costs. @'Pt' ,f\1\'ra- \ ';c/
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.