2013 (12) TMI 1462 - HC - VAT and Sales Tax

Maintainability of appeal - Held that - Authority shall not admit or allow the application where the question raised in the application is already pending before any officer or authority of the department or any other authority or appellate Tribunal or in Court and it relates to a transaction or issue which is designed apparently for the avoidance of tax. In other words the application before the Advance Rulings Authority has to be made before the question raised for consideration before any officer or authority of the department. If such a question is already decided by the authority acting on the decision the assessee can manage his affairs better. The authority who are subordinate to the said Advance Rulings Authority are bound by the opinion of the Advance Rulings Authority. At the same time once the said question arises for consideration before any officer or authority the said officer or authority is competent to decide the said issue of the assessee. If he is aggrieved he is provided with a statutory remedy of preferring an appeal before the appellate authority as well as to the Tribunal. It is only after inspection of the premises the authorities issued notices to the assessee calling upon him to produce the documents a recommendation is made for initiation of reassessment proceedings and a demand for 2 crores was made to the assessee which is already paid after protest the assessee filed the application before the Advance Rulings Authority. If the authorities have accepted the returns as it is and if they had no grievance whatsoever they would not have called upon the assessee to produce the books of account and would not have collected a sum of 2 crores as tax even under protest. - So prima facie the question of exemption is pending before the officer concerned for adjudication and therefore once such a question is pending before any authority or officer for adjudication the aforesaid provision makes it clear that an application for advance rulings is not maintainable - Decided against assessee.

Summary

Issues:
- Maintainability of the appeal against the rejection of the application by the Authority for Clarification of Advance Rulings.
- Interpretation of Rule 165(8) of the Karnataka Value Added Tax Rules, 2005.
- Analysis of Section 60 of the Act regarding Clarification on Advance Rulings.

Issue 1: Maintainability of the appeal
The appellant, a company registered under the Karnataka Value Added Tax Act, applied for clarification from the Authority for Advance Rulings regarding the exigibility of a transaction and liability of tax deducted at source. The Authority rejected the application citing that the questions raised were pending before audit authorities for previous tax periods. The appellant contended that as reassessment proceedings had not been initiated, and the department had not clarified the exemption status, the application was maintainable. The appellant's senior counsel argued that the application was wrongly rejected by the Advance Rulings Committee.

Issue 2: Interpretation of Rule 165(8) of the Karnataka Value Added Tax Rules, 2005
Rule 165(8) prohibits the admission of an application if the question raised is already pending before any departmental officer or authority, appellate tribunal, or court, or if it relates to a transaction designed to avoid tax. The Rule aims to ensure that applications for advance rulings are made before the question is under consideration by any departmental authority. In this case, the appellant filed the application after enforcement actions were taken, notices were issued, and a recommendation for reassessment was made, indicating that the question of exemption was already pending before the authorities for adjudication.

Issue 3: Analysis of Section 60 of the Act regarding Clarification on Advance Rulings
Section 60 of the Act establishes the Authority for Clarification and Advance Rulings to clarify tax rates, tax exigibility, input tax deduction eligibility, and tax deduction liability. The section mandates that no departmental officer or appellate tribunal can decide on issues for which an application for clarification has been made. The authority's decision is binding on the applicant and subordinate officers, subject to changes in law or facts. The section also empowers the authority to declare void any order obtained through fraud or misrepresentation. The finality of orders passed under this section is emphasized, except for appeals under Section 66.

In conclusion, the High Court dismissed the appeal, finding no illegality in the rejection of the application by the Advance Rulings Authority. The court upheld the prohibition outlined in Rule 165(8) and emphasized the importance of seeking advance rulings before issues are under consideration by departmental authorities. The judgment highlights the significance of timely and appropriate application for advance rulings to manage tax affairs effectively.