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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.
(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 ClarificationAdvance 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 rulingFor 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 partyAny 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 rulingThere 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 ActFrom 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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