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Advance Ruling - Always Ruing

JUNE 10, 2020

By Vijay Kumar

THE other day a senior advocate exclaimed, "I really wonder why do people keep seeking advance ruling !!!" Rue the day you decide to go for advance ruling, for you are almost sure to get a decision against you which would most likely be confirmed by the Appellate Authority for Advance Ruling and after that, you have nowhere to go!

We were taught that in Central Excise matters, there were only two authorities whose decisions were final - one was the Supreme Court and the other was the Inspector of Central Excise!, But we soon learnt that there were several authorities whose decisions were akin to the Supreme Court's - FINAL. We could also learn that there were some authorities like an Under-Secretary in the Revenue Department, who could over-rule the Supreme Court judgement and get the law amended retrospectively to overcome the difficulties posed by the Supreme Court judgement in collecting a tax that could not and should not have been collected. We believed that the High Courts had supervisory and writ jurisdiction over all the government authorities under their territorial areas. But it seems this view is not all that correct.

One such authority in GST, against whose orders, you have no right to appeal, is the Appellate Authority for Advance Ruling - AAAR. This AAAR consists of a Chief Commissioner of Central Tax and a Commissioner of State Tax and it has the ultimate power of having the last word on the issue referred to it. Is it true that we cannot approach the High Court or Supreme Court against an order of the AAAR? Sadly, it seems to be so.

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 its order, - 2019-TIOL-1236-HC-MUM-GST, the High Court observed - 

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.

Remember, much before the advance ruling concept came into GST, we had an ‘Authority for Advance Ruling' in Income Tax and this AAR was headed by a retired Supreme Court Judge. There was a doubt as to whether the orders of this AAR could be challenged in the High Courts or Supreme Court. In the Castleton Investment Ltd case - 2012-TIOL-36-ARA-IT, on 14.08.2012, the then Chairman of the AAR, retired Judge of the Supreme Court Justice Balasubramanyan held, "This Authority is bound only by the decisions of the Supreme Court. The decisions of High Courts have only persuasive value. This Authority is not subordinate to any High Court for even Article 227 of the Constitution to apply. Left to myself, I have grave doubts whether the jurisdiction under Article 226 will itself be attracted."

In an order delivered on 30 July 2012 in the case of Columbia Sportswear 2012-TII-04-SC-LB-INTL, the Supreme Court observed, "We do not think that we can hold that an advance ruling of the Authority can only be challenged under Article 136 of the Constitution before this Court and not under Articles 226 and/or 227 of the Constitution before the High Court. In L. Chandra Kumar v. Union of India and Others (supra), a Constitution Bench of this Court has held that the power vested in the High Courts to exercise judicial superintendence over the decisions of all courts and tribunals within their respective jurisdictions is part of the basic structure of the Constitution. Therefore, to hold that an advance ruling of the authority should not be permitted to be challenged before the High Court under Articles 226 and/or 227 of the Constitution would be to negate a part of the basic structure of the Constitution.

We are, thus, of the opinion that when an advance ruling of the Authority is challenged before the High Court under Articles 226 and/or 227 of the Constitution, the same should be heard directly by a Division Bench of the High Court and decided as expeditiously as possible."

Perhaps the AAR was not aware of the Supreme Court judgement delivered just fifteen days before his own judgement. But the Supreme Court admitted an appeal against the above AAR order- 2015-TIOL-329-SC-IT.

In the case of Sanofi Pasteur Holding SA, the Andhra Pradesh High Court observed, "In Columbia Sportswear, the Court ruled that the AAR being an authority and a body exercising judicial power conferred on it vide the provisions in Chapter XIX - B of the Act, is an authority (and a Tribunal) whose decision could be challenged under Articles 226 and/or 227 of the Constitution; and that such challenge should be heard directly by a Division Bench of the High Court. Maintainability of these Writ Petitions, challenging the ruling dated 28-11-2011 of the AAR, is therefore neither contested nor is contestable." And the High Court went ahead and quashed the order of the AAR.

The orders of the AAR headed by a retired Supreme Court judge could be challenged before the High Courts, but the orders of the present GST Appellate Authority for Advance Ruling (consisting of two bureaucrats) are final and cannot be challenged. Could this be true?

What is advance ruling? The Andhra Pradesh High Court in the case of Prathista Industries, observed, "The word 'advance' means made or given ahead of time. It is only a ruling given ahead of time which is an 'advance ruling'."

Do we really need a ruling ahead of time which would be trouble in times ahead? Why can't we just close down this advance ruing?

GSTR-3B through SMS:

A taxpayer can now file GSTR-3B, through SMS, apart from filing it through online mode, on GST Portal.

To file NIL Form GSTR-3B through SMS, the taxpayers must fulfill following conditions:

- They must be registered as Normal taxpayer/ Casual taxpayer/ SEZ Unit / SEZ Developer.

- They have valid GSTIN.

- Phone number of Authorized signatory is registered on the GST Portal.

- There is no pending tax liability for previous tax periods, interest or late fee.

- All GSTR-3B returns for previous tax periods are filed.

- No data should be in saved stage for Form GSTR-3B on the GST Portal, related to that respective month.

- NIL Form GSTR-3B can be filed anytime on or after the 1st of the subsequent month for which the return is to be filed.

NIL Form GSTR-3B for a tax period must be filed if the taxpayer:

- Has NOT made any Outward Supply

- Do NOT have any reverse charge liability

- Do NOT intend to take any Input tax credit; and

- Do NOT have any liability for that particular or previous Tax Periods.

Answer these questions:

- Have you made any supply of goods/services (including nil rated, exempt and non-GST supplies) or received any supplies liable to reverse charge or exempt, nil rated and non-GST inward supplies during this tax period?

- Have you made any inter-state supplies to unregistered persons, composition taxable persons or UIN holders?

- Do you intend to reverse Input Tax Credit (ITC)?

- Do you have any interest or late fee (including carry forward late-fee) liability to be paid?

- Do you have any tax liability, due to Form GST TRAN-1?

- Any other liability which is liable to be paid by you, while filing your return?

If your answer is 'yes' to any of the above questions, your return cannot be a ‘nil' return and so, no SMS.

These details are available on the website maintained by GSTN viz. https://www.gst.gov.in/newsandupdates/read/381 and at https://tutorial.gst.gov.in/userguide/returns/index.htm#t=faq_nilreturngstr3b.htm

Interestingly, this doesn't seem to be an important piece of information for the CBIC website.

Until next week


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