OCTOBER 17, 2018

By Vijay Kumar

Can't you withdraw an application for Advance Ruling?

IN the Mahabharat, there is a story of Abhimanyu who knew how to enter the Padmavyuh, but had no clue on how to come out of it. The Advance Ruling in GST also seems to be a Padmavyuh. You know how to enter it but there seems to be no exit possible, as a recent AAR Ruling would show. Just yesterday, I was speaking to a very senior GST officer, who told me that he was amused by an AAR decision which we discussed in these columns a few weeks ago. (GST on IIM) If he was amused by that decision, I am sure he would be anguished by this one.

Once you file an application before the Authority for Advance Ruling, are you doomed? Can't you withdraw that application?

In a recent order in the application made by KPH Dream Cricket Pvt Ltd - 2018-TIOL-206-AAR-GST, the Hon'ble AAR refused to allow withdrawal of the application and proceeded to decide the case.

The applicant approached the AAR with a question whether the activity of the applicant of providing complimentary tickets free of charge to some persons would be considered supply of service and would therefore be leviable to GST. After sometime, wiser counsel prevailed and the applicant requested withdrawal of the Advance Ruling application.

The AAR wisely noted,

It is interesting to note that after submission of the application, personal hearing and further additional submissions made by the applicant after the applicant had been spiritedly arguing as to how handing out of complementary tickets would not amount to supply under the GST Act, 2017, the applicant suddenly withdrew his advance ruling application. It is also interesting to note that the applicant has cited the Circular No. 47/21/2018-GST dated 8.6.2018 while withdrawing the application, which circular he had already referred to in his written submissions. Therefore, no new fact has been added by the applicant while requesting for withdrawal while he has stated his opinion on the issue that the two questions on which Advance Ruling has been sought stand already clarified by the said Circular.

While no specific provision in the CGST Act and the Punjab GST Act deals with the withdrawal of Advance Ruling applications, it is noteworthy that as per Section 98 of the CGST Act, 2017 and the concomitant Section 98 in Punjab GST Act, which lays down the procedure on how Advance Ruling applications are to be dealt with, the 'concerned officer' has been recognised as an equal stakeholder in the advance ruling process by making it mandatory for (1) copy of advance ruling application to be made available to him, (2) making it mandatory to hear his views, and (3) making it mandatory to supply the copy of Advance Ruling order to him. In the present scenario, the applicant has withdrawn his Advance Ruling application while indicating that his case is similar to the case of an Original Equipment Manufacturer (OEM) which has been discussed by the said circular as not constituting a supply, and the 'concerned officer' has reached a conclusion diametrically opposite that the activity of the applicant of supplying complementary tickets free of charge would amount to supply. Therefore, allowing for withdrawal of the present application in terms of the applicant without discussing the case on merits would not be in public interest. Hence. circumstances call for discussion on merits rather than allowing withdrawal, especially when both interested parties to the Advanced Ruling application hold contrary views.

So, the AAR went on to decide the case.

In the Discussions and findings portion of the order, the AAR mentions the word "complimentary" as "complementary". Both, as a matter of fact, do not mean one and the same. But these are "trivial" typographical mistakes for the Authority to be concerned with!

To reiterate its reasons for not allowing withdrawal of the application and my doubts:

When I don't want your advance ruling, why can't you simply dismiss my application as withdrawn and close the matter?

In the AAR for Customs, Central Excise and Service Tax, there was a provision under Regulation 17 that, "The applicant may withdraw his application within thirty days from the date of such application and thereafter only with the leave of the Authority." But there is no such provision under the GST laws and the AAR thinks that it is empowered to reject a withdrawal application. When the applicant does not want an advance ruling, why is the Authority keen to give it?

Even in the present GST regime, some State AAR Benches have allowed withdrawal of advance ruling applications as in:

1.  Popular Motor World - Kerala AAR

2.  Epcos India - Haryana AAR

3.  Zenith Controls & Systems - Karnataka AAR

4.  Amalgamations Valco Clutch Pvt. Ltd. 2018-TIOL-156-AAR-GST - Chennai AAR

In an order given exactly two years ago in Sainath Enterprises case - 2016-TIOL-2836-ITAT-MUM, the Mumbai Bench of ITAT observed, "It is now well settled that a petitioner/plaintiff is the dominus litis and it is open to him to pursue or abandon his case. Withdrawal cannot be denied except when the person making the prayer has obtained some advantage / benefit, which he seeks to retain.

I have personal experience of seeking to withdraw a writ petition in a High Court at the argument stage, when my petition was about to be dismissed. The High Court ordered, "Sri K.Vijay Kumar, learned counsel for the petitioner, after arguing the matter for some time, seeks leave to withdraw the writ petition without prejudice. The writ petition is accordingly dismissed without prejudice."

In a recent judgement, the Karnataka High Court observed, "It is the settled legal position that dominus litis has a right to withdraw the proceeding/s instituted by him."

The Madhya Pradesh High Court just a couple of months ago held, "The applicants/plaintiffs have a dominus litis of their litigation and the Court cannot refuse to permit them to withdraw the suit."

Then, why should the AAR give its ruling when the applicant doesn't want it?

So far, so good (or rather bad). The decision on merits is more appalling.

Here are the gems of wisdom from the AAR.

When the applicant issues a 'complimentary ticket' to any person, the applicant is certainly displaying an act of forbearance by tolerating persons who are receiving the services provided by the applicant without paying any money, which other persons not receiving such complimentary tickets would have to pay for.

The monetary value of this Act of forbearance would naturally be pegged to the amount of money charged from other persons not receiving the 'complementary tickets' for availing the same services.

The complementary ticket given by the applicant to various persons would certainly be covered by the term 'token' and 'voucher' which are both defined relatedly in the Oxford English Dictionary.

Therefore, the contention of the applicant that since complementary ticket recipient does not make any payment to the applicant, it can be said that supply of tickets is without any consideration and is accordingly not covered under Section 7(1) (a) of the CGST Act, 2017, would not stand the test of legal interpretation of Section 7 of the CGST Act, 2017 and would thus be fallacious.

It would be clear that the activity of the applicant of providing complementary (sic) tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 2017 and the parallel Section 9 in the Punjab GST Act, 2017.

If a complimentary ticket is given to a Judge or Minister or the GST Commissioner, according to the AAR, the Cricket match organisers are tolerating these persons who are receiving the services. How atrocious, even if true!

The Prime Minister visualized and publicized the GST as a good and simple tax. Obviously, he did not take into consideration, the ability of his babus in converting any simple tax into a mega complicated litigation prone tax administration. Maybe this case will go right up to the Supreme Court to decide whether the AAR can reject an application for withdrawal of the application for advance ruling. And whether free tickets given to VIPs for cricket matches are taxable. What will happen if no ticket is given but VIPs walk into the stadium (as they often do) and watch the match? What about the 'tokens' given to the staff, policemen, vendors, cheerleaders and several others who are allowed to watch the match freely? Should the organisers pay GST on the value of the tokens/passes given to them? And as of now, this ruling is applicable only in Punjab. Maybe very soon another State AAR will give a ruling that free tickets are not taxable. Then we can merrily have more litigation, while the Chief Justice of India is sacrificing leave to reduce litigation. What can he do when there is a huge machinery in government working overtime to produce enough work for him and all his judges?

The Central Excise and Service Tax AAR was headed by a retired Supreme Court Judge and had retired Board Members as its Members. The GST AAR consists of two Joint Commissioner level officers doling out orders as if they are Supreme Court Judges.

The AAR mechanism in GST should be abolished as soon as possible to bring in some order in the administration of GST.

But why do people go to the AAR? A triumph of hope over experience!

GST shock for JNU Students Union:

It is reported that JNU Students' Union (JNUSU) office bearers run the risk of their candidature being nullified, as the administration has said that their bills for expenditure incurred during the elections are not in proper format as they do not bear GST numbers.

The Dean of Students, in a letter written to the newly elected office bearers, stated: "The bills submitted are not in accordance with the Lyngdoh Committee recommendations and need to be original bills bearing GST number and to be self-attested by each candidate... failing which the election of the candidate will be nullified in the event of non-compliance or in the event of any excessive expenditure."

The JNUSU said that they were not liable to know whether the shops concerned from whom they bought articles were eligible for GST or not as there are numerous shops in and around JNU whose turnover is less than the prescribed limit under GST rules, above which the law applies.

Each candidate in the JNUSU elections is allowed to spend up to Rs. 5000/- inclusive of GST, but where can he produce GST invoices from?

GST lays its icy hands on students!