Karnataka AAAR dismisses an appeal as DGSTI initiated the investigation: GST

Karnataka AAAR dismisses an appeal as DGSTI initiated the investigation: GST

The Karnataka Appellate Authority of Advance Ruling (AAAR) upheld the ruling of Authority of Advance Ruling (AAAR) by dismissing the application as the investigation was already initiated by the Directorate of Goods and Service Tax Intelligence (DGSTI)

M/s Tirumala Milk Products Pvt. Ltd. (appellant) is engaged in the processing and manufacturing of Milk and other Milk-based products. It works in processing Milk and Milk products that also included flavored milk. It is carrying on its business in the State of Karnataka.

The advance ruling was sought by the appellant on the issue of whether flavored Milk is taxable under Schedule-IV of Goods and Services Act (GST Act) at the rate of 5%.

The application was rejected by the Karnataka AAR on the grounds of being "inadmissible" in terms of Section 98(2) [first proviso] of the Central Goods and Services Tax Act, 2017 (CGST Act). The reason for rejecting the application was that the DGSTI had already initiated an investigation in Bangalore Zonal Unit.

The appellant was not satisfied with the reasoning given for the rejection of the said application by AAR. Being aggrieved the appellant filed an appeal before Karnataka AAAR.

The Appellant put forth an argument that investigations conducted by any other agency would not attract the first proviso to Section 98(2) of the CGST Act. It would apply only when the same question was being investigated by the concerned officer and not otherwise.

The appellant had discussed the provisions of the CGST Act in a detailed manner wherein it had analyzed the intention of the legislature while framing the provisions of Section 98 of the Act.

The matter was listed before AAAR that comprised of D.P. Nagendra Kumar and M.S. Srikar. They analyzed the significance of the use of the expression "any proceedings" in the first proviso to Section 98(2) of the CGST Act. It was clarified that it encompasses within its fold proceedings pending either before the concerned/jurisdictional officer or before any investigative agency including DGSTI.

AAAR also noted that the statement recorded by the DGSTI regarding the summons issued, dealt with classification and rate of tax of "Flavoured Milk". Hence, AAAR held that the application filed by the appellant for an advance ruling was inadmissible according to the first proviso to Section 98(2) of the CGST Act as the investigation was already initiated by DGSTI who had a competent authority to do so.