JULY 03, 2019

By Vijay Kumar

WHEN GST was launched, an astrologer predicted that It would be horrendously difficult to live with GST for two years. "After that what will happen?", he was asked. "You will get used to it", was the terse reply. Unfortunately, neither the Government nor the taxpayer has got used to It. It will take some more time - no, not for a simple tax system to emerge, but for all of us to get used to It. We have tremendous tenacity - we will get used to anything and accept everything as our fate and even take it as 'for our good' destined by the unseen hand. Even the ramshackle kachori shop owner who was raided by a group of GST officers saw a positive ray in the raid that his shop received free global publicity. There is light at the end of the tunnel, however long the dark tunnel is, you have to just keep moving. Things are sure to settle, maybe in another fifty years; do have patience.

Advance Ruling Is Final

Beware of the Authority for Advance Ruling for you may have no remedy against their orders, at least against the orders of the Appellate Authority for Advance Ruling. The Advance Ruling Authority consists of two Joint Commissioners, who generally go out of their way to find some ground to pass an order in favour of the Revenue. All you can do is appeal to the Appellate Authority and if the appellate authority confirms the order of the lower authority, you hit a wall; you have nowhere to go. You may wonder what happened to the High Courts. Recently, the Bombay High Court held that the writ jurisdiction of the High Court cannot be used as an appellate remedy against orders of the Appellate Authority for Advance Ruling. In an order delivered last month, the High Court observed - 2019-TIOL-1236-HC-MUM-GST,

At the outset, we make it clear that we do not propose to examine the impugned orders on their substantive merits or demerits, merely because Statutes in question have not provided for any further appeal against the decision of the Appellate Authority. Any such attempt, would virtually amount to converting these proceedings under Article 226/227 of the Constitution of India, which are essentially proceedings seeking judicial review, into appellate proceedings.

The petitioner had pleaded that since the Statute has provided for no further appeal against the orders of Appellate Authority, this Court, should examine the impugned orders on the basis of substantive merits, as otherwise, the impugned orders would bind the petitioner qua the proposed arrangement, for all times.

But the High Court took the view that, the circumstance that the Statutes in question have provided for no further appeal against the decision of the Appellate Authority, will have to be respected and the validity or otherwise of the impugned orders will have to be examined by applying the principles of judicial review and not the principles which apply in case of an appeal. The High Court noted the Supreme Court observation in Appropriate  Authority and another vs. Smt. Sudha Patil and anr that merely because no appeal is provided for, against the order of appropriate authority directing compulsory acquisition by the Government, the supervisory power of the High Court does not get enlarged nor can the High Court exercise an appellate power.

The High Court further observed,

1. The principles of judicial review, normally do not concern themselves with the decision itself, but are mostly confined to the decision making process.

2. Such proceedings are not an appeal against the decision in question, but a review of the manner in which such decision may have been made.

3. In judicial review, the Court sits in judgment over correctness of the decision making process and not on the correctness of the decision itself.

4. In exercise of powers of judicial review, the Court is mainly concerned with issues like the decision making authority exceeding its jurisdictional limits, committing errors of law, acting in breach of principles of natural justice or otherwise arriving at a decision which is ex facie unreasonable or vitiated by perversity.

The High Court's view is fortified by a decision of the Supreme Court delivered on 1st July 2019 - 2019-TIOL-230-SC-MISC, wherein the Apex Court observed,

Judicial review, as is well known, lies against the decision making process and not the merits of the decision itself. If the decision making process is flawed inter alia by

1. violation of the basic principles of natural justice, is ultra vires the powers of the decision maker,

2. takes into consideration irrelevant materials or excludes relevant materials,

3. admits materials behind the back of the person to be affected or

4. is such that no reasonable person would have taken such a decision in the circumstances,

the court may step in to correct the error by setting aside such decision and requiring the decision maker to take a fresh decision in accordance with the law. The court, in the garb of judicial review, cannot usurp the jurisdiction of the decision maker and make the decision itself. Neither can it act as an appellate authority.

It needs no emphasis that complex executive decisions in economic matters are necessarily empiric and based on experimentation. Its validity cannot be tested on any rigid principles or the application of any straitjacket formula. The court while adjudging the validity of an executive decision in economic matters must grant a certain measure of freedom or play in the joints to the executive. Not mere errors, but only palpably arbitrary decisions alone can be interfered with in judicial review.

That's it, you can go to the High Court against an order of the Appellate Authority for Advance Ruling - only if the decision making process is wrong, not the decision itself. The decision, right or wrong, is final. Even the Constitution can be amended, but this order is final. One good reason why this Advance Ruling Authority has to be abolished. It has not served any useful purpose, except making GST more complicated. But the Government seems to be keen on continuing this institution. Why not, when most of the decisions are in your favour, most of which will not survive a judicial scrutiny. But alas, there is no judicial scrutiny. The only option available to the taxpayer is absenteeism. Don't go to the Advance Ruling Authority at all, don't ever. If you do, you are likely to be stuck with an order that is binding on you and against which you have no appellate remedies. If nobody goes for Advance Ruling, the institution will die naturally.

The same logic would be applicable for orders of the National Anti-profiteering Authority (NAA). Now High Courts may not entertain writ petitions against the orders of NAA on merits. But there is a difference. As far as Advance Ruling is concerned, it is your choice. You go there and invite an adverse order against which you have no remedy. In the case of Anti-profiteering Authority, you don't go willingly - you are invited (with no right to politely reject the invitation) to participate in the proceedings and handed out an order which may make you liable to pay crores of rupees - and no appeal.

This seems to be a wonderful method of simplifying the GST. Make Additional Commissioners the final appellate authorities with no provision for further appeals; so we don't need the Tribunal Benches; let's bar the High Courts and declare that GST is simple and litigation-free.

No GST on renting of residential property: Here is a refreshing order from an Advance Ruling Authority. A flat in a residential complex rented out to a company Larsen & Toubro Ltd, which is being used by an employee of the Company. Revenue states that provisions of the Exemption Notification apply to renting of dwelling units for residential purpose. It should not be available when the dwelling unit is rented to a commercial entity like M/s Larsen & Toubro Ltd. The Authority held that no tax is payable. - 2019-TIOL-186-AAR-GST Hopefully, the Revenue will not go in appeal. There is some light somewhere in the tunnel. No, not really. While celebrating this order, another order shouts for attention. Another Bench of the Advance Ruling Authority recently held that the Applicant shall be liable to pay IGST on ocean freight paid on imported goods under Reverse Charge Mechanism irrespective of the ocean freight component having been a part of the CIF value of imported goods. - 2019-TIOL-196-AAR-GST

With that happy kachoriwala, into the third year of GST

Until next week