Advance Rulings - Central Excise Practice Manual (OLD) - Central Excise

Chapter No. 31 ADVANCE RULING Advance Ruling has been introduced with a view to help the non-resident investor in ascertaining his duty liability in relation to an activity proposed to be undertaken in order to avoid long drawn and expensive litigation at a later date. The provisions regarding 'Advance Ruling' are contained in sections 23A to section 23H of Central Excise Act (CEA), 1944. Meaning of 'Advance Ruling' As per section 23A(b) of CEA advance ruling means determination of question of law or fact regarding liability to duty in relation to an activity proposed to be undertaken. As per section 23 A (a) of CEA activity means production or manufacture of goods includes any new business of production or manufacture proposed to be undertaken by existing manufacturer or producer. Thus as per section 23C of CEA 'advance ruling' can be sought on any question in respect of: - 1. Classification of goods under the central excise tariff act, 1985. 2. Principles applicable for valuation of goods for purpose of assessment. 3. Applicability of exemption notification under section 5A of CEA. 4. Notification (and not a circular) issued in respect of duties of excise under the Central Excise Tariff Act and any duty chargeable under any other law for the time being in force. 5. Admissibility of credit of service tax paid or deemed to have been paid on input service or excise duty paid or deemed to have paid on the goods used in or in relation to the manufacture of the excisable goods. 6. Determination of the liability to pay duties of excise on any goods under the act. As per section 23D(2) of CEA, the authority shall not allow the application for advance ruling where the question raised in the application: - 1. is already pending before an officer of excise/ customs, Tribunal or Court, or 2. is already decided by Appellate Tribunal or Court, or 3. determination as to whether a particular process amounts to manufacture or not. 'Authority' for advance ruling: - Finance act 2005 has renamed 'Authority for Advance rulings' as 'Authority for Advance Rulings (Central Excise, Customs and Service Tax)'. It shall be constituted by Central Government by issuing a notification in official gazette. As per section 28F of Customs Act, 1962, the authority shall consist of three members: - 1. a chairman, who is a retired Judge of the Supreme Court of India, 2. an officer of Indian Customs Central Excise who is qualified to be a Member of the Central Board of Excise Customs, 3. an officer of Indian legal Service who is or is qualified to be an Additional secretary to the Government of India. The authority can function even if there is any vacancy or defect in the constitution of authority. As per section 28F of Customs Act, 1962, the authority shall be situated in Delhi. Powers of the 'Authority' 1. The authority will have all the powers of a 'civil court' in respect of the following matters: - discovery and inspection, enforcing the attendance of any person, examining people on oath, issuing commissions, compelling production of books, documents etc. 2. The authority will also have the power to regulate its own procedure in all matters arising out of exercise of its power under the Act. 3. The authority shall be deemed to be 'civil court' (for the purpose of section 195 of Code of Criminal Procedure) and every proceedings before the authority shall be deemed to be a 'judicial proceeding' (under section 193 and 228 of the Indian Penal Code). 'Applicant' seeking advance ruling As per section 23A(c ) of CEA application for advance ruling can be made by any of the following: - 1. (a) A Non-resident setting up a joint venture in India in collaboration with a non- resident or residernt; or (b) A Resident setting up a joint venture in India in collaboration with a non-resident; or (c) A wholly owned subsidiary Indian company, of which the holding company is a foreign company, who or which, as the case may be, proposes to undertake any business activity in India. 2. A joint venture in India; or 3. A resident falling within any such class or category of persons, as the Central government may, by notification in the official gazette, specify in this behalf (means the provision of advance ruling can be extended to any resident by issuing a notification). Public Sector Company, resident public limited company, resident private limited company and resident importing goods under project import scheme and resident firm are notified class of persons under this provision. The term 'non-resident', 'Indian company' and 'Foreign company' will have meaning assigned to them under Income Tax Act. Advance ruling can be sought only in respect of activity proposed to be taken. Applicant who has already commenced his business cannot seek advance ruling. Thus any person, who is a non-resident and is setting up a joint in India in collaboration with a non-resident or resident, or a resident who is setting up a joint venture in India in collaboration with a non-resident can seek advance ruling. Vide finance Bill, 2005, section 23A of Central Excise Act, 1944 is being amended, so as to, even existing Joint venture in India can avail the benefit of Advance Ruling. [Thus a resident cannot apply for advance ruling unless he is entering into joint venture in collaboration with non-resident]. Binding of advance ruling As per section 23E of CEA, advance ruling shall be binding only: - 1. On the applicant who has sought it. 2. On the commissionerate in respect of the applicant. The advance ruling will continue to be binding unless there is change in law or facts on the basis of which advance ruling was given. It does not bind others. Though legally, ruling in other case will not be binding on department but it will have persuasive value and therefore cannot be discarded by the department without valid reasons. Authority for Advance rulings (Customs, Central Excise and Service Tax) Procedure regulations, 2005 details the procedure for obtaining advance rulings. (I). Procedure for seeking advance rulings 1. Filling of application - An application for advance ruling should be submitted in quadruplicate to the authority in the form-AAR (CE). Application can be handed over in person or by an authorised representative or sent by registered post or courier or speed post to secretary or any other officer authorized by the secretary in this behalf of Authority for advance rulings (Central Excise, Customs and Service Tax). The question of law or fact on which advance ruling is sought be stated clearly in the application. 2. Signing of application - Application along with other documents should be duly signed by the authorized person. In case of authorized person the application should also be accompanied with the power of attorney authorizing him to sign the application. 3. Fees for filing an application - An application should be accompanied by a fee of ₹ 2500 through a demand draft drawn in favour of the 'Authority for Advance rulings' payable at New Delhi. 4. Withdrawal of application - An applicant may withdraw his application within 30 days from the date of filing the application. (II). Procedure to be followed by authority for advance ruling on receipt of application 1. On receipt of application, the authority shall pass an order admitting or rejecting the application. The authority shall forward a copy of order to the applicant and the Commissioner. 2. The contents of an application would not be disclosed to unauthorized persons. 3. The authority has the sole discretion to accept or reject the application. If the application is accepted, authority will examine the material submitted by applicant or obtained by the authority. If application is rejected, an opportunity of hearing will be given to the applicant and reasons for the rejection will also be given in the order. 4. As per section 23D(5), the applicant is require to represent his case either personally or through authorized representative as set out in section 35Q. 5. The authority should pronounce the final order (or advance ruling) within 90 days of receipt of application. 6. Copies of final order, signed by the members of authority, will be sent to the applicant and the Commissioner. Advance ruling obtained by fraud or misrepresentation Advance ruling shall be void ab initio, if it is subsequently found to have been obtained by fraud or misrepresentation of facts. Thereupon, all the provisions of the Act shall apply to the applicant as if such ruling had never been made. Copy of the order declaring the ruling void ab initio shall be sent to the applicant and Commissioner of central excise. Reasonable opportunity of being heard will be given to the applicant and commissioner.