V.L. Traders (Vipulbhai Laljibhai Dobariya) vs. Na
(AAR (Authority For Advance Ruling), Gujrat)

The applicant M/s. V. L. Traders submitted that it supplies the goods ‘Papad’(uncooked/ semi-cooked) of different shapes and sizes.

2. Question on which Advance Ruling sought

(i) Under which Tariff Heading the product dealt in by the applicant i.e. Papad of different shapes and sizes are eligible to be classified?

(ii) What is the applicable rate of SGST and CGST on supply of such Papad of different shapes and sizes?

Directorate General of Goods& Services Tax Intelligence (DGGI) Surat Zonal Unit Submission:

3. The Authority vide letter dated 2-7-21 required the Additional Director General, DGGI, Surat to inform whether any enquiry has been initiated against the Applicant with respect to the question raised in the subject application. If yes, the date of initiation of enquiry to be specified. Further, vide letter dated 29-7-21, the Authority required DGGI, Surat to intimate, as follows:

1. Whether any proceedings under relevant Section of CGST Act was initiated. Copy of notice to be submitted.

2. Has any summons/ proceedings initiated. Copy of the same to be submitted.

3. Has any Search proceedings/ DRC-01A Part A under Rule 142 (1A) of CGST Rules, 2017/ an inquiry/ proceeding was initiated before 5-3-20. Copy of the same to be submitted.

4. The Deputy Director, DGGI Surat submitted as follows-

i. a case of misclassification of goods ‘fryums’ against M/s VL Traders (Trade name), Shri Vipul Laljibhai Dobariya (legal name) has been booked by DGGI on 17-2-2020. The said case was booked for supply of goods falling under HSN 2106, whereas they classified the same under HSN 1905 which classify Pappad and Pappad products, thereby evading GST payment.

ii. Search was conducted at the premises of M/s VL Traders on 17-2-2020 under section 67(2) CGST Act and forwarded a copy of the Search Authorisation in this regard.

iii. It is to inform that an investigation has been initiated against M/s. JK Foods, JK Snacks and M/s. V L Traders, in connection with misclassification of goods ‘fryums’ under Section 67 (2) of CGST Act, 2017 by way of search authorization on 17-2-20 and further under Summons mode under Section 70 of CGST Act, 2017 by DGGI.

iv. The said investigation has been initiated for supply of goods ‘fryums’ under HSN ‘1905’ which classify ‘Pappad’ and and ‘ Papad Products’, instead of HSN ‘2106’, thereby evading GST payments @18%.

v. Shri Vipul Laljibhai Dobariya is partner in M/s. JK Foods, M/s. JK Snacks and Proprietor of M/s. V. L. Traders.

vi. Summons dated 17-2-20 was issued to Shri Vipul Laljibhai Dobariya, partner M/s. JK Foods and a combined statement of Shri Vipul Laljibhai Dobariya was recorded for all three firms viz. M/s. V L Traders, M/s. JK Foods and M/s. JK Snacks.

vii. Another Summons dated 6-3-20 was issued to Shri Vipul Laljibhai Dobariya, partner M/s. JK Foods and a combined statement of Shri Vipul Laljibhai Dobariya was recorded for all three firms viz. M/s. V L Traders, M/s. JK Foods and M/s. JK Snacks.

Personal Hearing

5.1 Personal hearing was granted on 23-12-20. Shri Ishwarkumar Jivani appeared (online hearing).

5.2 Personal hearing was granted on 15-6-21. Due to request for adjournment by the applicant, another hearing was granted on 30-6-21. Shri Hemant Desai, Advocate and Shri Ishwar Jivani, CA appeared hearing and re-iterated the submissions made in the application. On specific enquiry whether any enquiry/ proceeding has been initiated in relation to the question raised in the subject application, the authorised representatives submitted that no enquiry was initiated against the applicant.

Findings

6 . The issue before us is whether subject Application merits admissibility in wake of DGGI investigation initiated against the applicant vide Search Authorisation (Authorisation No 189/2020) dated 17-2-20 and that DGGI had initiated summon proceeding dated 17-2-2020 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.

7. We have carefully considered all the submissions made by the applicant and DGGI.

8. We have examined the subject application. We first refer to Sr. No 17 of subject Application Form GST ARA-01 filed on 5-3-20 for obtaining the Advance Ruling, reproduced as follows: “I hereby declare that the question raised in the application is not (tick)”

1. Already pending in any proceedings in applicant case under any of the provision of the Act

2. Already decided in any proceedings in applicant case under any of the provision of the Act

8.1 On examination of said declaration, We find that the applicant has declared that it has no proceedings pending with respect to subject questions raised in the application.

9. We find that the DGGI initiated the Summons proceedings under section 70(1) CGST Act against the applicant, prior to the subject GST-ARA 01 Application filed. We note that Section 70(2) of CGST Act, 2017 has deeming provision that, every such inquiry referred to in sub-section (1) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code. Thereby we hold that subject inquiry initiated under Section 70(1) of the CGST Act 2017 by the DGGI on the applicant is a judicial proceeding. We further note that the investigation initiated by DGGI against the applicant is on the same issue the applicant approached us for pronouncing a Ruling on classification of subject goods.

10. The applicant was aware of the Search conducted in its premises vide a valid Search authorisation issued by competent authority under Rule 139(1) CGST Rules and Section 67(2) CGST Act and the proceedings initiated vide said Summons under the provisions of Section 70 of CGST Act. The proprietor of the applicant was aware that he had given a combined statement in pursuance to the summons issued, but the applicant neither declared the truth at said Sr no 17 of subject Application Form GST ARA-01 nor was forthcoming before us when we enquired the applicant during the hearing whether any inquiry was initiated by DGGI Surat on the applicant with respect to the Questions raised in the subject application. We hold that the applicant has mis-declared at said Sr No 17 of subject GST ARA-01 Application form and further suppressed this material fact before us, despite being specifically enquired by us during the hearing on 30-6-21 wherein the authorised representatives of the applicant submitted that no investigation has been initiated by the DGGI, Surat on the applicant.

11. We hold that the Advance Ruling cannot be used as a mechanism to nullify and frustrate the inquiry proceedings already initiated vide section 70(1) of CGST Act.

12. 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 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.

13. In conspectus of aforementioned findings, we hold, as follows:

i. the applicant has suppressed the material facts that DGGI had initiated inquiry with respect to the same Questions raised in the subject Application and that the proceedings initiated by DGGI vide relevant sections of CGST Act was initiated prior to filing of subject Advance Ruling application.

ii. The applicant had been issued Summons vide Section 70 CGST Act, prior to the filing of subject Application.

iii. 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.

14. We hold that investigation initiated against the applicant is a proceeding within the ambit of Section 98 (2) of CGST Act.

15. The application is hereby rejected as non-maintainable and inadmissible.