Advance ruling shall be invalid if obtained through misrepresentation of facts

Fact and Issue of the case

The present appeal has been filed under Section 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s. J. K. Papad Industries (hereinafter referred to as the “Appellant”) against the Advance Ruling No. GUJ/GAAR/R/77/2020 dated 17.09.2020.

The appellant raised the following questions for advance ruling in the application for Advance Ruling filed by it before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’).

1. Under which tariff Heading the product dealt in by the applicant i.e. PAPAD of different shapes and sizes are eligible to be classified

2. What is the applicable rate of CGST and SGST on supply of such papad of different shapes and sizes.

The appellant has submitted that they are engaged in the business of manufacturing and trading of “Papad” of different shapes and sizes. Papad is crunchy snack that is conceptualized as a product that is raw pallet yet semi-cooked / un-cooked and needs to be cooked first either by frying or roasting before consuming as and when required.

Observation of the Authority

The appellant has contended that the proceedings under section 67 or Chapter XIV of the CGST Act, 2017 are not covered under the term ‘proceedings’ used in the first proviso to sub-section (2) of section 98 of the CGST Act, 2017. We find that this contention of the appellant is not borne out from the plain reading of the said proviso. As per the said proviso, 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 of this Act. The term ‘any’ used in the said proviso before the term ‘proceedings’ and before the phrase ‘the provisions of this Act’ leaves no room for any doubt and make it amply clear that the scope of the proviso is wide and it covers any proceedings under any of the provisions of the CGST Act, 2017 with the conditions that such proceedings should be related to the question raised in the application and such proceedings should be in the case of the applicant. In the present case, the proceedings initiated by the DGGI, Surat was in the case of the appellant and it was precisely related to the question raised in the application filed before the GAAR. Therefore, the application of the appellant could not have been admitted by the GAAR in view of the first proviso to sub-section (2) of Section 98 of the CGST Act, 2017.

As regards the statements of the partner of the appellant recorded before the DGGI, Surat and affidavits filed by the appellant retracting those statements, we make it clear that neither we are going into those aspects nor into the merit of the case, as the same are beyond the scope of the present proceedings.

The GAAR as well as this authority are the creature of the statute and are required to act and exercise the powers conferred in accordance with the provisions of the law. Once it is clear that the application of the appellant could not be admitted in view of the provisions of first proviso to sub-section (2) of section 98 of the CGST Act, 2017, neither the GAAR nor this authority has any discretion to allow such application.

Thus, it is evident that the appellant has not informed the aforesaid material facts to the GAAR at any given point of time thereby willfully suppressing the fact from the Authority and obtaining the Ruling by suppressing the facts. Section 104 of the CGST Act, 2017 stipulates that any Ruling obtained by the applicant under Section 98(4) of the CGST Act, 2017 by “fraud or suppression of material facts or misrepresentation of facts” may be declared void ab-initio. Section 104 of CGST Act, 2017 has been reproduced below for ready reference.

104. Advance ruling to be void in certain circumstances.— (1) Where the Authority or the Appellate Authority finds that advance ruling pronounced by it under sub-section (4) of section 98 or under sub-section (1) of section 101 has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made there under shall apply to the applicant or the appellant as if such advance ruling had never been made:

Provided that no order shall be passed under this sub-section unless an opportunity of being heard has been given to the applicant or the appellant.

From the facts and records discussed herein above, authority is of the view that the appellant has obtained the Advance Ruling by submitting application of advance ruling with suppression of material facts or misrepresentation of facts, and the application was not eligible to be admitted in view of proviso to sub-section (2) of section 98 of the CGST Act, 2017. Therefore, in terms of Section 104 of the CGST Act, 2017, and the GGST Act, 2017, the advance ruling pronounced by the Gujarat Authority of Advance Ruling is liable to be declared as void ab-initio.

As such, authority do not find it necessary to examine the other arguments canvassed by the appellant in the present case.

In view of the foregoing, authority modify the Advance Ruling No. GUJ/GAAR/R/77/2020 dated 17.09.2020 of the Gujarat Authority for Advance Ruling in the case of M/s J. K. Papad Industries and declare it void ab-initio.