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A major tax payer friendly
initiative in the shape of Advance Ruling has
been taken by the State of Haryana in its VAT Act. Many other States
like Karnataka and Maharashtra are also proposing to incorporate
provisions of advance ruling in their proposed VAT law. There is no
such
provision in the model Value Added Tax Act, made by Prof. Atre,
consultant to Finance Ministry. Thus, the proposal of few states to
bring in the provision of Advance Ruling in their VAT laws is
certainly
a welcome and progressive step in the administration of VAT laws.
Though
there are similar provisions in the Income Tax Act, 1961 and Central
Excise Act but perusal of provisions in Haryana Value Added Tax Act,
2003 (HVAT Act) indicate that these have been drafted afresh and has
no
parallel to similar provisions contained elsewhere. An attempt has
been
made in this article to analyse the implication of these provisions
contained in Haryana Value Added Tax Act, 2003.
The provisions in respect of
Advance ruling has been contained in
Section 56 of HVAT Act and Rule 68 of Haryana Value Added Tax Rules,
2003, which are as follows :
56 (3) The Sate Government may, if it
considers it necessary or
expedient so to do, for the purpose of maintaining uniformity in the
levy, assessment and collection of tax or for the removal of any
doubt,
suo motu or on an
application made to it in the prescribed form and
manner on payment of the prescribed fee by a
dealer or a body of
dealers, issue an order clarifying
any point relating to levy,
assessment and collection of tax and all persons
employed in the
administration of this Act except an appellate
authority, and
all
dealers affected thereby shall observe and follow such
order.
(4) ................................................
(5) If any person feels aggrieved by an order publicized under
sub-section (4), he may at any time prefer an
appeal against such order
to the Tribunal and for this purpose the order shall be deemed
to be an
order passed under this Act:
Provided that where an appeal is preferred against such order to the
Tribunal, it shall be heard and decided by the full-member
Tribunal.
(6) The Tribunal may, after giving notice to the State Government,
stay
the operation of the order appealed before it under sub-section (5)
and
where a stay is granted, the appeal shall be heard and decided within
a
period of sixty days from the date of the stay order.
Rule 68(2) A dealer or a body of
dealers may, at any time, by making an
application to the State Government in Form VAT-M4 accompanied with
court fee stamps of five hundred rupees, seek
clarification on an
important issue relating to the levy, assessment and collection
of tax
under the Act which has not been settled by an
order of the Tribunal or
the law declared by the High Court or the supreme Court. All
persons
employed in the administration of the Act except an appellate
authority,
and all dealers shall observe and follow the order issued by the State
Government clarifying the issue.
Meaning
of the word " Advance Ruling"
The words " Advance Ruling" per se has not been used by the
HVAT Act.
These words has been used in Karnataka VAT Bill and has been defined
in
as follows :
164(a) " Advance Ruling" means a determination by the
authority in
relation to a transaction, which has been undertaken or is proposed to
be undertaken by a dealer registered under the Act."
The HVAT Act has used the words " Clarifying" which also
means
determination by the authority in relation to a
transaction.
Difference of Advance Ruling and
Clarification
Advance ruling is applicable only in respect of one person i.e
applicant
whereas clarification is applicable in respect of all the persons
having
the same facts as has been provided for seeking of clarification.
Example : Applicant A seeks advance ruling on certain facts applicable
to him. Advance ruling on his application will be applicable to him in
respect of those facts. No other person having the same facts can take
shelter under that advance ruling issued to some other person. Whereas
any person having same facts can plead the clarification issued on
application of somebody.
Who can
make application
The application for advance ruling under HVAT Act can be made by a
dealer or a body of dealers ie a trade association. Similar provisions
have been incorporated in the Maharashtra VAT bill. Under the Haryana
VAT Act, the State Government sou motu can also issue clarification on
any issue. Whereas, only registered dealer is entitled to make an
application under the Karnataka VAT Bill. Thus a tax practitioner is
not
entitled to make an application for clarification under the
law.
For what
an application can be made
The application under the HVAT Act can be made for clarification on
any
point relating to levy, assessment and collection of tax. The only
condition is that such an issue should not have been settled by an
order
of the Tribunal or the law declared by the High Court or Supreme
Court.
Similarly Maharashtra VAT bill provides that application can be made
for
interpretation on any provisions of Act, rules or notification.
Whereas,
an application under Karnataka Act can be made to clarify on the
applicable rate of tax in respect of any goods or exigibility to tax
of
any transaction under the Act.
Authority
for advance ruling
For giving of advance ruling, State Government is an authority under
the
HVAT Act. Whereas Commissioner under the Karnataka Act constitute the
authority consisting of three additional commissioners and bench of
Tribunal is the authority under the Maharashtra Act to pronounce an
advance ruling.
On whom
advance ruling shall be binding
Advance ruling pronounced under HVAT Act is binding on :-
- All dealers affected thereby including the dealers who are
not party
to seeking of such ruling.
- All persons employed in the administration of the HVAT Act
except an
appellate authority.
The advance ruling pronounced under Maharashtra Act is binding on
every
body without an exception.
The advance ruling pronounced under Karnataka Act is binding only on
dealer who has sought such ruling and only in respect of goods /
transaction for which it has been sought. All the authorities
subordinate to Commissioner will be bound by it.
When can
an application for advance ruling may be rejected
There is no provision of rejection of an application for advance
ruling
in HVAT Act. Thus, an application for advance ruling cannot be
rejected
under HVAT Act unless it is not in respect of an issue which has been
settled by Tribunal, High Court or Supreme Court. In fact an
application
can not be made for any such issue under HVAT Act. Similarly, the
Karnataka Act also does not have any provision for rejection of
application. Whereas in Maharashtra Act an application for advance
ruling can be rejected by Tribunal, in case it finds that the
application does not involve an important and substantial question of
law.
Appeal by
an aggrieved party
Any person aggrieved by an order of advance ruling may prefer an
appeal
against such order to the Tribunal under HVAT Act and it shall be
heard
and decided by full member Tribunal. Maharashtra Act provides that the
advance ruling order can be challenged in the High Court. The appeal
against such advance ruling may either be made by Commissioner or by
an
aggrieved party. Under the Karnataka Act the advance ruling order
remains binding unless there is change in law or facts on the basis of
which order was passed.
Reversal
/ withdrawal of advance ruling
There is no provision in the HVAT Act for the withdrawal or reversal
of
the advance ruling given by the State Government. However in the
absence
of an express power given in the Act, an issuer has an inherent power
to
withdraw the ruling. Whereas Maharashtra Act provides that Tribunal
can
overrule its earlier advance ruling then the Tribunal may direct that
the overruling shall not affect the liability of any person liable to
pay tax in respect of any period ending on or before the date of
overruling. Karnataka Act also does not provide for overruling of
advance ruling issued.
Issues
under HVAT Act
From the above, following issues emerge in respect of law on advance
ruling provided under Haryana Value Tax Act, 2003
1. Advance ruling by State Government - In no case there is
provision
for advance ruling by State Government itself. State Government is the
agency to issue rules in respect of law. Any clarification issued by
State is considered equal to law and thus have the same
force.
2. Exclusion of appellate
authorities - The law provides that all the
authorities excluding appellate authorities will be bound by advance
ruling order. Strictly interpreting even the revisional authority is
bound by clarification issued by State. As the assessing authority and
dealers are bound by an advance ruling order then in which case any
order made by an assessing authority can be made part of
appeal.
3. Non provision of
withdrawal or revision - There is no express
provision of reconsideration of advance ruling issued. This would mean
that advance ruling once issued cannot be reconsidered by the State
Government. However issuer continues to enjoy inherent power to
reconsider or withdraw the ruling. An express provision providing for
such power and also the restrictions and conditions for use of such
power will go a long way benefiting the revenue and
assessee.
4. Advance ruling for
issues pending before Tribunal, High Court or the
Supreme Court - An application of an advance ruling cannot be made on
an
issue, which has been settled by Tribunal or High Court or Supreme
Court. But there is no bar in the Act for making an application on an
issue, which is pending before High Court or Supreme Court. Would a
clarification issued by the State during the pendency of an issue
before
High Court or Supreme Court not influence the decision in that
case?
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