Advance Ruling Powers Diluted By Clarification

  • 04-August-2014
  • Advance Ruling Powers Diluted By Clarification

The idea of creating the Authority of Advance Ruling in 1999 was to give specific rulings to individual assessees who are entitled to Rulings when they start manufacture or import etc.

But a vagueness has been created by an interpretation given by the Board to the Section 23D sub section (2)(b). This sub section says that the Authority will not give a Ruling where the question raised is "the same as in a matter already decided by the Appellate Tribunal or any Court".

There are similar sections for Customs and Service Tax. The Board has given a clarification vide instruction F.No.275/83/2012-Cx.8A dated 29th November, 2013, which has diluted the issue about giving a specific ruling for a particular assessee.

This instruction says that the issue or the question of law which stands already decided by the Appellate Tribunal or any court in the case of any party will fall outside the purview of the Authority for Advance Rulings.

However, care should be taken by the Authority to satisfy that the issue has actually been so decided, squarely covers the issue raised by the applicant. This clarification has been issued because there has been a doubt about the interpretation of Section 23D(2)(b). The doubt is whether the decision given by the Tribunal or Court is in relation to him or in relation to any other person.

The previous sub section (a) mentions "in the applicant's case". In the sub section (b) it is not written "in the applicant's case". But the meaning would be complete if only sub section (b) also relates "to the applicant's case". If it is not, that is to say, if it relates to anybody else's case, then it will mean that it will be an open issue. There are many judgements in relation to the same issue, both in Tribunal as well as in the courts and sometimes in the Supreme Court.

For example, regarding the leviability of service tax on clubs, there are several court judgments that Service Tax is not leviable on clubs based on the principle of mutuality.

If a club (as a joint venture with foreign collaboration) approaches the Authority for Advance Rulings for a ruling in its case, and if the Authority does not give a ruling on the ground that the issue has been decided by the courts in some other cases, then the club is in the same problem of uncertainty because the Department will routinely disallow any claim for non-payment of duty.

This is what is happening also in the case welding electrodes where there are hundred judgements that input credit is available, but the Department is denying it routinely in each case. It is difficult to understand why the CBEC has never been able to find sufficient time to issue a tariff ruling in regard to welding electrodes.

The Department is under pressure to fulfil the revenue target. In this context, one has to take into account the fact that the Department files litigation in the most frivolous manner and nearly 90 per cent of the cases are lost by the Department in appeal, Tribunal and in court stages.

The conclusion is that in view of the reality that an individual assessee does not get justice (or gets a delayed and litigated justice) from the Department unless he has a specific Ruling in his favour, and also in view of the fact that the Authority for Advance Rulings was created only to give him a specific ruling, the present interpretation given by the CBEC in the above instruction is quite contrary to the interests of the general tax payers. They need a specific ruling even if there is a general issue decided by the Tribunal or the court.

So Section 23D(2)(b) should be amended to incorporate the expression "in the applicant's case" as in the Section 23D(2)(a). I also suggest that even Section 23D(2)(a) should be amended to delete "before any Central Excise Officer" because once it goes to a Central Excise Officer, it takes years to come out of it and go to the Tribunal. So the amended Section 23D(2)(a) should read "already pending in the applicant's case before the Tribunal or any court.

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