2012 (4) TMI 491 - AAR - Service Tax

Maintainability of application filed u/s 96(C) of the Finance Act, 1994 whether subsidiary of a subsidiary of a Government company, could invoke the jurisdiction of Authority for advance ruling - questions, identical to the ones sought to be raised by the applicants, are pending before the CESTAT at the instance of the holding company Held that - If ruling is given in this case, it will bind only the applicants, this would mean CESTAT is free to render a ruling ignoring what is being ruled by this Authority. Such a situation should be avoided. Also, once the existence of the conditions specified by any one of the clauses barring the jurisdiction of the Authority is established, the Authority was bound to reject the application. No necessity is felt for adjudication on first contention. We, thus, reject these applications in exercise of our discretion Decided against the appellant.

Summary

Issues:
1. Maintainability of applications filed before the Authority for Advance Rulings invoking Section 96(C) of the Finance Act, 1994.
2. Eligibility of subsidiaries of a Government company to apply for advance ruling.
3. Interpretation of the term "subsidiary" in the context of Section 617 of the Companies Act.
4. Bar under the proviso to Section 96D(2) of the Act when identical questions are pending before another authority.
5. Exercise of discretion by the Authority under Section 96D(2) to allow or disallow an application for an ultimate ruling.

Analysis:
1. The applicants, being subsidiaries of a Government company, filed applications invoking Section 96(C) of the Finance Act, 1994 before the Authority for Advance Rulings. The department raised objections to the maintainability and entertainability of the applications, arguing that subsidiaries of a subsidiary of a Government company are ineligible to apply for advance ruling. The department contended that identical questions were pending before another tribunal, and the applicants were created to overreach potential decisions. The applicants countered by asserting that no proceedings were pending against them, meeting the eligibility criteria.

2. The definition of an applicant under Section 96A(b) includes a resident falling within categories specified by the Central Government. A notification specified a public sector company, as defined under the Income-tax Act, for advance ruling purposes. The dispute arose regarding the interpretation of the term "subsidiary" in the context of a Government company, with the department arguing against including subsidiaries of subsidiaries within the definition.

3. Regarding the objection of identical questions pending before another authority, the applicants sought to establish their independence from the holding company, emphasizing that no proceedings were pending against them. The Authority exercised discretion under Section 96D(2) to determine the admissibility of the applications for an ultimate ruling under Section 96D(4). The Authority cited a previous ruling emphasizing the need to avoid conflicting decisions on identical questions.

4. The Authority decided not to adjudicate on whether a subsidiary of a subsidiary of a Government company could invoke its jurisdiction for advance ruling. Instead, the Authority relied on its discretion under Section 96D(2) to reject the applications, considering the potential for conflicting decisions and the spirit of the provisions concerning advance rulings. The Authority rejected the applications to prevent incompatible decisions on the same question by different authorities.

In conclusion, the Authority exercised its discretion to reject the applications based on the principle of avoiding conflicting decisions and upholding the spirit of advance ruling provisions. The decision highlighted the importance of preventing incongruous situations and maintaining consistency in rulings across different authorities.