9911796707
TMI Blog2011 (5) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation, USA. The applicant is already in business in India. Its current business falls in two categories, software and services. In the software business it provides distribution per sub-licensing of software along with related services. It has entered into, a Software Duplication and Distribution License Agreement dated 1-6-2003 with Oracle Systems Corporation formed in USA. In terms of that agreement, the applicant has been granted a non-exclusive non-assignable right and authority to duplicate on appropriate carrier media Software products as per standard Oracle product list updated from time to time and to sub-license the same in India. In the service business, the applicant provides captive support services to Oracle Group of Companies. These services include captive software development services to Oracle Group Companies, software consultancy services and back office IT support to Oracle Group Companies. It also provides consultancy and educational services. 3. Oracle Systems Corporation has now started a hardware business. The same can be broadly classified as Oracle hardware systems product and Oracle hardware systems support. Oracle has a wide range of Oracle Har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to the customers in India and whether the constructed cost method proposed by the applicant for the imports of spare parts for fulfilling warranty and annual maintenance contract obligations is in consonance with the provisions of section 14 of the Act and Rule 8 of the Rules particularly taking into account the method of calculating the constructed cost as detailed in the application. 6. In support of its claim of eligibility for seeking Advance Ruling, the applicant submits that the applicant is a wholly owned subsidiary company of which the holding company is a foreign company and that it proposes to undertake a new business activity in India, and it is making an application for Advance Ruling under section 28H(1) of the Act. The Ruling is sought on questions, essentially on the principle to be adopted for the purposes of determination of value of the goods under the provisions of the Act. The applicant also asserts that it satisfies the requirement of being a wholly owned subsidiary Indian company of which the holding company is a foreign company. The applicant proposes to undertake a new business activity in India of selling, distributing and servicing Hardware Produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Tariff Act, 1975 and matters relating thereto. On receipt of the application, the Authority, after examination of the application and the records called for, may either reject the application or admit the application (the statute uses the expression "allow the application") and thereafter in cases where the application is admitted, after examination of further materials that may be placed before it, pronounce its Advance Ruling on the question or questions specified in the application. At this stage, what we are, therefore, called upon to decide is whether the applicant is eligible to seek an Advance Ruling and whether the questions posed for our ruling come within the purview of Section 28H of the Act. 9. Learned Counsel for the applicant submits that clause (c) of Section 28E defines an applicant and the applicant company, a wholly owned subsidiary Indian company of which the holding company is a foreign company, proposes to undertake a new business activity in India, namely, sales and service of Hardware Products. The applicant is eligible to maintain this application in terms of sub-clause (c) of Section 28E(c)(i) of the Act. Learned Counsel further submits that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted. Counsel submits that the very object of creating the machinery for advance ruling was to shorten litigation and the narrow construction convassed for by the department would tend to defeat that object. He submits that there is no warrant for accepting the interpretation canvassed for by the representative for the department. 10. We shall first consider the question of the eligibility of the applicant to invoke Chapter VB of the Act dealing with advance rulings. It is true that the applicant is a wholly owned subsidiary Indian company of which the holding company is a foreign company. On that score, therefore, the applicant is entitled to approach this Authority for an Advance Ruling. The additional qualification needed by such an applicant is that it should "propose to undertake, any business activity in India". Admittedly, the applicant is already engaged in the business of import into India. The claim of the applicant is that hardware business is something which has been newly undertaken by its holding company and that a new business is sought to be started by the applicant in India by undertaking a new business activity. The sale of hardware and the service thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to be taken up. Thus in the interpretation of applicant, there seems to be no logical reason to jettison the defined meaning. 13. Let us now read Sec. 28E(c)(i)(c) invoked by the applicant. It speaks of a wholly owned subsidiary Indian Company of which the holding Company is a foreign company which "proposes to undertake any business activity in India" Substituting the defined meaning of 'activity' the provision would be 'proposes to undertake any business of import or export in India. Proposes means plans or intends Undertake means make one responsible for and begin (an activity) or begin, commence, embark on, taken on, take up. The business must be in India. So it must be an entity that intends to commence or take up the business of import or export in India. Does this understanding result in an ambiguity? It cannot be said to create any ambiguity. If so, what would be the justification for not adopting the defined meaning for the expression 'activity'? We think there is none. So, on the terms of the provision only an entity that proposes to commence a business of import or export in India that can seek an advance ruling. An entity that has already commenced or set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case in the legislation on hand. But then, one must be satisfied that the context requires the expression which is defined by the Act, to be understood in a manner different from the defined sense. As observed by the Privy Council almost a century ago, in Indian Immigration Trust Board of Natal v. Govindaswamy (AIR 1920 PC 114) and by the Supreme Court in Vanguard Fire and General Insurance Company Limited, Madras v. Fraser & Ross [1960 (3) SCR 857], when a word has been defined in the interpretation clause, prima facie that definition governs whenever that word is used in the body of the statute. As observed by Lord Lowry in Wyre Forest District Council v Secretary for State for the Environment [(1990) 2 AC 357(HL)]. "If parliament in a statutory enactment defines its terms (whether by enlarging or by restricting the ordinary meaning of a word or expression), it must intend that, in the absence of a clear indication to the contrary, those terms as defined shall govern what is proposed, authorized or done under or by reference to that enactment". 16. But, of course, where the context makes the definition given in the interpretation clause inapplicable, a defined word, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, not possible to agree with the argument that such an interpretation would discourage foreign investment. Moreover, India is now a prominent business destination and leaving entities already here, to go through the regular route for assessment of duty, would not lead to any particular hardship. It will only mean that those who are already in the business of import or export here, will have a level playing field with the resident entities. There would be nothing unjust in that position. Moreover, an existing entity otherwise qualified and which is not in the business of export or import and which proposes to start the business of import or export, would not be precluded from approaching this Authority for an Advance Ruling, in spite of this interpretation. 18. When a tribunal is constituted and powers are conferred on it to determine certain matters specified by the statute, clearly the jurisdiction of the tribunal is confined to the matters specified. As regards that jurisdiction, a liberal construction may be adopted to achieve the object sought to be achieved. But, the construction may not be so elastic as to warrant the bringing into that jurisdiction matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the jurisdiction of this Tribunal derives support from the legislative history as well. One may contrast the definition of 'Advance Ruling' in the Act with the one in Section 245N of the Income-tax Act. That provision can be said to be a forerunner of Section 28E of the Act. The definition in Section 245N of the Income-tax Act reads : "advance ruling means- (i) a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non resident applicant; or (ii) a determination by the Authority in relation to [the tax liability of a non-resident arising out of] a transaction which has been undertaken or is proposed to be undertaken by a resident applicant with [such] non-resident. (iii) A determination or decision by the Authority in respect of an issue relating to computation of total income which is pending before any income-tax authority or the Appellate Tribunal and such determination or decision shall include the determination or decision of any question of law or of fact relating to such computation of total income specified in the application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant is seeking a ruling on valuation under the Customs Tariff Act, 1975, which does not come within the scope of clause (c). It is pointed out that the expression "of this Act" can refer only to the Customs Act and not to the Customs Tariff Act. Clause (c) is compared to clause (d) of Section 28H(2) to point out that whereas under clause (d) both the Customs Act and the Customs Tariff Act are mentioned, in clause (c) there is only a mention of the Customs Act. Clauses (a) and (e) of Section 28H(2) are also referred to, to point out that whenever the Act wanted this body to decide a question relating to the Customs Tariff Act, 1975. It has specifically authorized it to do so. 24. We are not inclined to sustain this objection on behalf of the Customs. A reference to section 12 of the Customs Act dealing with dutiable goods shows that duties of Customs have to be levied at the rates specified under the Customs Tariff Act, 1975 or any other law for the time being in force in India. Section 14 dealing with valuation of goods says that valuation is for the purposes of the Customs Tariff Act, 1975 or any other law for the time being in force. Section 2 of the Customs Tariff Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already in the business of import or export, simply because it intends to start a new line of import or export, it is not given right to approach this Authority for a Ruling on its liability to duty regarding the proposed new business" (para 18). (Emphasis provided) 28. Section 28-I of the Customs Act, 1962 lays down the procedure to be followed on receipt of an application for advance ruling. Sub-section (2) of the said Section 28-I requires the application to be rejected where the question raised in the application is, - (a) Already pending in the applicant's case before any officer of customs, the Appellate Tribunal or any Court; (b) The same as in a matter already decided by the Appellate Tribunal or any Court : There is no other substantive provision requiring the application to be rejected. However, the definitions of the terms "advance ruling" and "applicant" in Section 28E do prescribe the parameters within which the Authority is required to consider applications filed with it. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imports an article 'X', no doubt he is ineligible to approach the Authority subsequent to completion of importation of the said article for a ruling pertaining to article 'X'. However, if an eligible applicant has commenced the import activity and approaches the Authority to seek a ruling in respect of import of a new item where the applicant entertains a doubt regarding one of the questions on which ruling can be sought under sub-section (2) of Section 28H, to decline his request for a ruling would be taking too narrow a view of the term "activity". 30. An entrepreneur setting up a business activity may need to import scores or even hundreds of items at various stages of setting up of the business operations. It is possible that for most of items proposed to be imported he may not entertain any doubt about the duty liability or that such imports are covered by previous judicial decisions and hence he may choose not to seek a ruling from the Authority before commencing their import. However, he may have genuine doubts about the duty liability in respect of some of the items whether it is on matter of rates of duty or principles of valuation. He may need a definitive ruling be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keting pattern resulting in a change in the duty liability. (Misc. Order No. AAR/01/(CUS)/2010, dated 6th August, 2010). Relevant extracts of para 10 of the said order are reproduced as follows : "Adopting this approach, we are inclined to take the view that the applicant shall not be denied the remedy of seeking advance ruling on the ground that the import activity has already started and any further imports of the same products cannot be regarded as one "proposed to be undertaken". Though in a broad sense the future imports are not something new, the complexion of the import transaction takes a different color. Hitherto goods have been imported on the premise that all of them are for retail sale. Now, before clearing the goods, the applicant is in a position to identify whether or not they are meant for re-sale or for providing services etc. and the applicant will be giving a declaration to the effect that the particular goods are not meant for re-sale. If so, the duty liability will be different. At this juncture, we may again point out that we are proceeding on the basis that the applicant's version and contention is correct. Therefore, we are of the view that the proposed imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the Central Excise Act, 1944 (Section 23A) and in the Finance Act, 1994 (Section 96A) relating to levy and collection of service tax. The term "activity" has been defined only in the Customs Act and Central Excise Act; no definition of "activity" has been provided in the Finance Act. In view of the identical definition of "applicant" in the provisions relating to Advance Rulings in the three statutes it would be incongruous to imply that the term "business activity" implies business of import or export for the purposes of the Customs Act, 1962, the business of production or manufacture for the purpose of Central Excise Act, 1944 but the term "business activity" would assume its natural meaning of when it comes to interpreting the Finance Act, 1944 for Service tax. A similar incongruity is noticed if the defined meaning of "activity" is applied for interpreting the expression "economic activity" for the three acts. These expressions ought to have the same interpretation for the chapters relating to advance rulings in all the three Acts. 35. In the facts of the case before us it is true that the applicant is already in the business of import of software and provides servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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