TMI Blog2021 (8) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ruling dated 20-1-21. However this does not shirk away the responsibility cast on the applicant. The matter at present is not appeal issue as prescribed at section 100 of CGST Act, but the matter at hand to decide whether the Ruling may be declared void abinitio as prescribed at section 104 of the CGST Act. The Authority has been empowered vide Section 104 of CGST Act to declare a Ruling void abinitio . 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. 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. The applicant has obtained said Advance Ruling dated 20-1-21 by suppressing the material facts. It is declared that Advance Ruling in IN RE: M/S. SHALBY LIMITED, [ 2021 (4) TMI 557 - AUTHORITY FOR ADVANCE RULING, GU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id ab initio considering the following facts, grounds and submissions. 1. The Authority, in their case has pronounced the ruling which implies that their application for advance ruling has been admitted after examining the application and the records in terms of provisions of section 98(2). Hence, the question raised in the application is not reported to be pending or decided in any proceedings. 2. Section 98(2) of the CGST Act will attracted only when a show cause notice has been issued or when an order is already passed on the question on which a ruling is sought. In their case, the matter was only under inquiry and investigation and no show cause notice is served to them till date. The investigation initiated by the State Tax department is not within the ambit of the term proceedings for the purpose of Section 98 (2) of the SGST Act/ CGST Act. 3. The mere initiation of an investigation under the Act itself would not exclude the jurisdiction of the AAR and in this regard following judgments are relying upon : (i) The decision of the CIT-I Hon ble High Court (International Taxation) v. Authority of Advance Ruling reported at [2020] 119 Taxmann.com 80 (Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olumbia Asia Hospitals (P.) Ltd Advance Ruling No. KAR ADRG 26 of 2018 dated 13-112018 [2019 (20) GSTL 154 (AAR-GST)] Kinder Womens Hospital Fertility Centre (P.) Ltd Advance Ruling No. Ker/48/2019, dated 12-04-2019 [2019 (24) GSTL 809 (AAR-GST)] Kindorama Healthcare (P.) Ltd., Advance ruling No. KER/47/2019 dated 12-04-2019 [2019 (24) GSTL 804 (AAR-GST)] Terna Public Charitable Trust order no. GSt-ARA-135/2018-19/B-55 dated 21-05-2019 [2019 (27) GSTL 421 (AAR-GST)] Baby Memorial Hospital Ltd Advance Ruling No. KER/57/2019 dated 05-09-2019 [2020 (32) GSTL 59 (AAR-GST)] Shifa Hospitals advance ruling order no. 42/AAR/2019 dated 23-09-2019 [2019 (30) GSTL 378 (AAR-GST)] Royal Care Speciality Hospital Ltd. advance ruling ORDER No. 46/ARA/2019 dated 26-092019 [2019 (30) GSTL 481 (AAR-GST)] Baroda Medicare Private Limited Advance Ruling No. GUJ/GAAR/R/106/2020 dated 30-12-2020 10 If department is aggrieved by the ruling, it could have filed an appeal before the Appellate Authority for Advance Ruling. The department by not filing the appeal against the said Ruling, it is unfair, illegal and unwarranted on the part of the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise. The State Revenue contests that said Advance Ruling was obtained by the applicant by not declaring the questions raised in the application dated 2-12-20 is already pending in a proceeding initiated by the Revenue. 7. We have carefully considered all the submissions made by the applicant. 8. We first refer to Sr. No 17 of subject Application FORM GST ARA-01 filed on 2.12.2020 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 or decided with respect to subject questions raised in the application. 8.2 We find that the Revenue initiated the following against the applicant prior to the said Application filed by the applicant : i. Initiated access to business premises, under Section 71 of GGST Act, on 46-19 and this proceeding (as termed by Revenue) was converted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government is not lost in evasion. Therefore, commencement of investigation in terms of Section 71 of the CGST Act, 2017 can be said to be the start of a proceeding to safeguard the Government revenue. We are therefore 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- i. investigation proceedings launched by the State Revenue vide Section 71 of SGST Act, 2017 ii. proceedings initiated vide three GST DRC-01A Part A all dated 11-2-20 . 13. The applicant submitted that Show Cause Notice is the point of commencement of any proceeding and relied upon Master Circular on Show Cause Notice, Adjudication and Recovery (Circular No. 1053/02/2017-CX dated 10.03.2017) issued by the CBIC. We refer to Para 2.1 of said circular wherein it is stated that SCN is the starting point of any legal proceedings, conveying the picture that by issuing a Show Cause Notice marks the starting point for legal proceedings such as adjudication, appeal and recovery proceedings. Further, it is clarified in para 2.1 that the Show Cause Notice is the basic documents for settlement of any tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 655411 655411 3324684 Income from Nursing Centre 1099392 1099392 576132 576132 1099392 1039992 5549832 Net Pharmacy Income-Within Package 2579655 2579655 3227823 3227823 2579655 2579655 16774266 Net Pharmacy Income-Outside Package 371290 371290 449366 449366 371290 371290 2383892 Net Implant Income-Within Package 974719 974719 2336441 2336441 974719 974719 8571758 6929978 6929978 7518183 7518183 6929978 6929978 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not paid GST on it, tax dues are ascertained as per above table. Net Pharmacy income-Within Package: Hospital is providing various surgery related procedure to the indoor patients and for it, it has developed package too. But, it is optional. In package model, Hospital is giving specified service (room rent/doctor fees etc.) + certain pharmacies+ equipment (stent/implant) to the patients. If extra pharmacy/equipment Is administered by the Hospital as per the need of the patients thon it Is charged extra in the bill. Bill is generated for package and Whatever extra 15 charged which is shown separately from package amount. Hospital is not paying GST on pharmacy included in package and whatever extra amount of pharmacy it has charged. Whatever pharmacy/equipment is administered to the patients Is as per the need of the patients so it is contingent in nature and can be considered as mixed supply. Section 65 of The Drugs and Cosmetics Rules, 1945 makes it mandatory to Hospital to separately maintain records of drugs/pharmacy it administers to patients so it is separately Identifiable independent supply. Hospital is charging pharmacy at MRP price to the patients. MRP include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on shown in above table (both for within package and outside package) has given due credit of tax involved in purchase. You are hereby advised to pay the amount of tax as ascertained above along the amount of applicable interest and penalty under section 74(5) by 25/02/2020, failing which Show Cause Notice be issued under section 74(1). In case you wish to file any submissions against the above the same may be furnished by 25/02/2020 in Part B of this Form. (Jagruti R. Gohil) Assistant Commissioner Of State Tax(2) Enforcement Co-ordination Gujarat State, Ahmedabad Annexure - A FORM GST DRC-01A Intimation of tax ascertained as being payable under section 74(5) [See Rule 142 (1A)] Part A No.: Add. SGST/DC. Enf/67/Shalby/SCN/2019-200. No.859 dated 11.12.2020 To GSTlN-24AAICS5593B1ZC Shalby Ltd 976 PAIKI 6, Shalby Hospital OPP KARNAVATI CLUB, S. G. HIGHWAY Ahmedabad. Gujarat-380015 Sub.: Case Proceeding Reference No. - Intimation Of liability under section 73(5 )/section 74(5) - reg. F. Y.2017-18 Please refer to the above proceedings. In this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42234750 Interest is calculated @24% till 10/02/2020. Hospital has to calculate it till date of payment- (a) Grounds Following non compliances of various provisions of GGST Act, 2017, CGST Act, 2017 and rules made thereunder are identified during the inspection: Income of Liquidated Damages : Shalby Ltd. (herein after referred as Hospital) has not levied and paid GST on amount of liquidated damages which it had recovered from the contractor due to not adhering the time limit agreed in the agreement executed between the Hospital and contractor. Amount is booked as revenue and same is in the nature of penalty as stated in the agreement itself. Penalty is levied due to breach of agreement condition related to completion of construction within certain time limit. It is covered in scope of supply u/s 7 r.w. definition of consideration u/s 2(31) hence subject to GST. As hospital has not paid GST on it. tax dues are ascertained as per above table. Miscellaneous Charges Income: Hospital has not levied and paid GST on Miscellaneous charges. Miscellaneous charges are in the nature of income like facilitation service provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax component too, Pharmacy is taxable item and as tax is not charged on the value of that component, GST liability arise to that extent. Calculation shown in above table (both for within package and outside package) has given due credit of tax involved in purchase. Not Pharmacy income-Outside Package: In Other cases where patients have not opted for package, hospital recovers charges of doctor fees, room rent, pharmacy and equipment it uses while providing Indoor Patient service. All charges are separately shown in the bill. Hospital is not paying GST on it. Whatever pharmacy/equipment is administered to the patients is as per the need of the patients so it is contingent in nature and can be considered as mixed supply. Section 65 of The Drugs and Cosmetics Rules, 1945 makes it mandatory to Hospital to separately maintain records of drugs/pharmacy it administers to patients so it is separately identifiable independent supply. Hospital is charging at MRP for pharmacy it administers to patients. MRP includes tax component too. Pharmacy is taxable item and as tax is not charged on the value of that component, GST liability arise to that extent. Calculation shown in abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax/interest/penalty payable by you under section 7345) / 74(5) with reference to the said case as ascertained by the undersigned in terms of the available information, as is given below: The Grounds and quantification are attached/ given below: Year Particular Tax Interest Penalty Total CGST ACT SGST Act CGST ACT SGST Act CGST ACT SGST Act April-19 to May-19 Miscellaneous Charges income 211551 211551 34438 34438 211551 211551 915080 Preventive Health Check-up-Income 143814 143814 26253 26253 143814 143814 627762 Net Pharmacy Income-Within Package 938580 938580 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net Pharmacy income-Within Package: Hospital is providing various surgery related procedure to the indoor patients and for it, it has developed package too. But, it is optional. In package model, Hospital is giving specified service (room rent/doctor fees etc.) + certain pharmacies+ equipment (stent/implant) to the patients. If extra pharmacy/equipment Is administered by the Hospital as per the need of the patients thon it Is charged extra in the bill. Bill is generated for package and Whatever extra 15 charged which is shown separately from package amount. Hospital is not paying GST on pharmacy included in package and whatever extra amount of pharmacy it has charged. Whatever pharmacy/equipment is administered to the patients Is as per the need of the patients so it is contingent in nature and can be considered as mixed supply. Section 65 of The Drugs and Cosmetics Rules, 1945 makes it mandatory to Hospital to separately maintain records of drugs/pharmacy it administers to patients so it is separately Identifiable independent supply. Hospital is charging pharmacy at MRP price to the patients. MRP includes tax component too, Pharmacy is taxable item and as tax is not charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as given due credit of tax involved in purchase. You are hereby advised to pay the amount of tax as ascertained above along the amount of applicable interest and penalty under section 74(5) by 25/02/2020, failing which Show Cause Notice be issued under section 74(1). In case you wish to file any submissions against the above the same may be furnished by 25/02/2020 in Part B of this Form. (Jagruti R. Gohil) Assistant Commissioner Of State Tax(2) Enforcement Co-ordination Gujarat State, Ahmedabad 15. We find that State Revenue has issued three FORM DRC-01 Part-A all dated 11-2-20 under Rule 142(1A) of SGST Rules, 2017 Intimation of tax ascertained as being payable under section 74 (5) . The Form DRC-01A Part A prescribed under the said Rule is mandatory before service of Show Cause Notice because under Section 74 (5) of the Act if taxpayer paid the said ascertained tax amount along with interest and applicable penalty then proper officer shall not serve any Show cause Notice to the taxpayer. Therefore, we are of the opinion that issuance of FORM DRC-01A Part A under Rule 142 (1A) is a proceeding in terms of Section 98(2) of CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the State Revenue. The matter at present is not appeal issue as prescribed at section 100 of CGST Act, but the matter at hand to decide whether the Ruling may be declared void abinitio as prescribed at section 104 of the CGST Act. We hold that the Authority has been empowered vide Section 104 of CGST Act to declare a Ruling void abinitio . 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. Further, we hold that Advance Ruling cannot be misused when GST DRC-01A has already been issued, even prior to filing of Advance Ruling application. 21. 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. The applicant has obtained said Advance Ruling dated 20-1-21 by suppressing the material facts. 22. We find that the applicant has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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