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TMI Blog2012 (8) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... iii), therefore, we hold that the petitioners being a step-down subsidiary company of a Government Company are covered within the definition of the "applicant" in terms of section 96A(b) of the Finance Act. The applications filed by the petitioners before the AAR under section 96C were maintainable. As the petitioners and the holding company were separate and distinct legal entities and had independent rights and the AAR does not possess absolute discretionary power. Under section 96D(2) proviso (a) the important words used are, “in the applicant’s case”, which clearly explains that if in the applicants own case any matter is pending or had been decided then the AAR could dismiss the application - The AAR could not reject the applications of the petitioners under its discretionary power as there were no exceptional circumstances, or abuse of the legal process or rendering incompatible decisions concerning the same parties or any anomalous situations would have arisen if the AAR would have pronounced advance ruling. The petitioners had not yet entered into any transaction and the advance ruling had been sought on the proposed activity or service, therefore, the petitioners’ appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sources to the destination. The petitioners would also require service of other contractors for inspection, consulting, engineering etc. which would be required to being into existence the pipeline. 4. Under the contract, composite price would be agreed between the parties, however, the same would be divided into two key components, namely, price and supply of goods and price for provision of service. 5. Under the EPC contracts, the petitioners propose to procure the pipes from the EPC Contractors under a bill to ship to arrangement whereby the pipes purchased by EPC contractors from pipe manufacturers would be directly shipped by such manufacturers to the petitioners' project site under the cover of appropriate statutory documents/invoice. Upon receipt of the pipes at the project site, the petitioners would issue the same to the EPC Contractors free of costs under bailment for provision of the services of installation and commissioning by putting together the pipes and bringing into existence the desired pipeline along the identified route. The service by the EPC contractors would essentially consist of putting together the individual pipes issued free of cost by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication filed by the petitioners under Section 96C as not maintainable on the ground that an identical issue was pending before the CESTAT in the case of the petitioners' holding company on account of which, if the contention of the petitioners is accepted then it would lead to incongruous situation. In the opinion of AAR, any order passed by it could lead to incompatible decision by different authorities on an identical transaction and identical issue. 9. Both the writ petitions have been filed by the petitioners under Article 226 and 227 of the Constitution challenging the order dated 30.3.2012 passed by AAR. Since the writ petitions raise common questions of law and the facts are similar, therefore, we have taken up the writ petitions together. 10. We have heard Mr. Sujit Ghosh, the learned counsel assisted by Mr. R. D. Rana and Mr. Maulik. G. Nanavati, appearing for the petitioners and Mr. Y. N. Ravani, learned counsel appearing for the respondents at length. 11. The learned counsel for the petitioners has urged that the AAR has committed an error of fact in assuming that the issue pending before the CESTAT in case of the petitioners holding company and the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit. The Apex Court in Columbia Sportswear Company v. Director of Income Tax, Bangalore, 2012 (7) SCALE 53 = in paragraph 10 had held as under: We have, therefore, no doubt in our mind that the Authority is a body exercising judicial power conferred on it by Chapter XIX-B and is a tribunal within the meaning of the expression in Article 136 and 227 of the Constitution. In the aforesaid decision the Apex Court was considering the question whether the advance ruling pronounced by the Authority for Advance Rulings (Income Tax) constituted under Chapter XIX-B of the Income Tax Act, 1961, could be challenged under Article 226/227 of the Constitution before the High Court or under Article 136 before the Supreme Court and whether the authority is a court or tribunal. The Apex Court in paragraph 12 had held as under: Therefore, to hold that an advance ruling of the authority should not be permitted to be challenged before the High Court under Articles 226 and/or 227 of the Constitution would be to negate a part of the basic structure of the Constitution. The Apex Court further held that advance ruling pronounced by the Authority for Advance Rulings shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up a joint venture in Indian in collaboration with a non-resident or a resident; 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; (ii) a joint venture in India; or (iii) 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, and which or who, as the case may be, makes application for advance ruling under sub-section (1) of section 96C.] [Explanation:- For the purposes of this clause, joint venture in India means a contractual arrangement whereby two or more persons undertake an economic activity which is subject to joint control and one or more of the participants or partners or equity holders in a nonresident having substantial interest in such arrangement;] (c) application means an application made to the Authority under sub-section (1) of section 96C; (d) Authority means the Authority for Advance Rulings, constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary of a Government company as thus defined. 13.3. Section 4 of the Companies Act, explains the meaning of 'holding company' and subsidiary . Section 4(1) of the Companies Act, along with the statutory illustration is extracted below: Section 4(1): (1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,- (a) that other controls the composition of its Board or directors; or (b) that others- (i) where the first mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting right in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company; (ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital (c) the first-mentioned company is a subsidiary of any company which is that other's subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act, the petitioner being a subsidiary company had been given status of Government Company. However, for the purpose of filing the applications before the AAR the petitioners are separate tax payers and separate legal entities. The petitioners have every legal right to maintain the application before the AAR for obtaining advance ruling. And the petitioners were eligible applicants before the AAR being qualified as Government Company under section 617 of the Companies Act. 13.6. When a company is registered and a certificate of incorporation is issued by the Registrar, the company becomes a separate legal entity. Section 4 of the Companies Act lays down that a company is a subsidiary of another if such other company (a) controls the composition of its Board of Directors; or (b) holds half of the nominal value of its equity shares; or (c) if it is a subsidiary of any company which is subsidiary of other company. The respondents have stated that the petitioners are twice removed subsidiary of subsidiary of a government company. The expression, twice removed is, normally, used to describe relationship and it means that there is a two-generation gap. Subsidiary of subsidiary o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application. The proviso carves out an exception that AAR may not allow the application in two situations. First, where in applicant's own case, the question raised in the application is already pending before any Central Excise Officer, the Appellate Tribunal or any Court. The second circumstance in which the AAR may reject the application is where the question raised in the application is same as in a matter already decided by the Appellate Tribunal or any Court. There is no third situation or circumstance provided by the proviso under which the AAR could reject the application under section 96D(2). He urged that the AAR has no absolute discretionary power. He vehemently urged that the AAR had not been conferred with any discretionary power by the legislature to refuse to exercise powers in absence of embargo created by the proviso to section 96D(2). 14.1. The Authority for Advance Ruling (Central Excise, Customs and Service Tax) had been constituted and a new concept of advance ruling had been introduced by the legislature, initially, for the benefit of non-residents. In view of section 96A(b) of the Finance Act, now a resident can also apply for obtaining advance rulin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (2) shall be sent to the applicant and to the Commissioner of Central Excise. (4) Where an application is allowed under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority, pronounce its advance ruling on the question specified in the application. (5) On request received from the applicant, the Authority shall before pronouncing its advance ruling, provide an opportunity to the applicant of being heard either in person or through a duly authorised representative. Explanation:-For the purpose of this sub-section, authorised representative has the meaning assigned to it in sub-section (2) of section 35Q of the Central Excise Act, 1944 (1 of 1944). (6) The Authority shall pronounce its advance ruling in writing within 90 days of the receipt of application. (7) A copy of the advance ruling pronounced by the Authority, duty signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner of Central Excise as soon as may be, after such pronouncement. 14.4. In the case in hand, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either allow or reject the application: Provided that the Authority shall not allow the application where the question raised in the application;- (i) is already pending before any income tax authority or Appellate Tribunal [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N] or any court; (ii) involves determination of fair market value of any property; (iii) relates to a transaction or issue which is designed prima facie for the avoidance of income tax [except in the case of resident applicant falling in sub-clause (iii) of clause (b) of section 245N]: Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard; Provided also that where the application is rejected, reasons for such rejection shall be given in the order. 14.6. If we read section 245R(2) with section 96D(2) in juxtaposition we find that section 245R(2) uses the expression, that the Authority shall not allow the application where the question raised in the application is already pending before any income tax authority or Appellate Tribunal. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the view taken in Microsoft Operations Pte. Ltd. (supra) that the AAR has discretionary power, which could be exercised on germane and weighty considerations. The discretion has to be exercised judiciously keeping in view the spirit and purpose of the provisions concerning advance ruling. The discretion may be invoked in exceptional cases on the grounds not expressly spelt out by the statute. The Finance Act had contemplated only two situations in which the application for advance rulings can be rejected. The first clause of the proviso to section 96D(2) of the Finance Act clearly suggests that legislative intent was to avoid two parallel proceedings by an applicant before adjudicating authorities, namely, any Central Excise Officer, the Appellate Tribunal and Court as well as before AAR simultaneously. The second clause of the proviso restricts an application before AAR if the same issue had already been decided by the Tribunal or any Court. There is no third clause in the proviso. Section 96D(2) gives discretionary power to the AAR in exceptional cases to reject an application but does not confer absolute discretionary power on the AAR. 14.8. In the impugned order dated 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holding company were separate and distinct legal entities and had independent rights and the AAR does not possess absolute discretionary power. Under section 96D(2) proviso (a) the important words used are, in the applicant s case , which clearly explains that if in the applicants own case any matter is pending or had been decided then the AAR could dismiss the application. It is not disputed by the AAR in the impugned order that in the instant case that the question raised in the applications filed by the petitioners under section 96C were either pending in the petitioner's own case before any Central Excise Officer, Appellate Tribunal or any Court or the question raised in the applications filed by the petitioners had been decided by the Appellate Tribunal or any Court. Therefore, the embargo mentioned in the two clauses of the proviso to section 96D(2) were not existing which could oust the jurisdiction of the AAR. The questions raised by the holding company or the transaction details of the holding company or the records of CESTAT were not available with the AAR. Merely because the proposed business of the petitioners was similar to that of the holding company, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regards, the point-wise compliance report of para 4 of the said letter is as under :- (i) As per available information it is to report that M/s. Gujarat State Petronet Ltd., Gandhinagar is a subsidiary of M/s. Gujarat State Petroleum Corporation Ltd. (A Govt. of Gujarat undertaking). Further, M/s. GSPL India Transco Limited Gandhinagar (applicant) is a subsidiary of M/s. Gujarat State Petroleum Ltd., Gandhinagar. Therefore, as per Section 617 of the Company Act, 1961 read with Section 4 of the Company Act, 1961 M/s. GSPL India Transco Limited is a Government Company and accordingly is valid applicant within the meaning of Section 96A(b) (iii) of the Finance Act, 1994 read with Notification No.27/2009-ST dated 20.8.2009. (ii) The activity/service in respect of which an advance ruling has been sought is a proposed one. (iii) No case is pending involving issue raised by the applicant, as the applicant has not started such activity/service yet. However, it is to bring to your kind notice that on an identical issue one show-cause notice has been issued to M/s. Gujarat State Petronet Ltd. (GSPL), a holding company of the applicant, for denial of CENVAT credit availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending in GSPL India Transco Limited s case before any Central Excise Officer, but Appellate Tribunal or any Court (as the Ld. Commissioner specifically admits) nor is it same as in a matter already decided by the Appellate Tribunal or any Court especially since the appeal filed by the Applicant s holding company is pending before the honourable CESTAT. 3.7. However, the Ld.Commissioner fails to take cognizance of Section 96(c)(2)(d) which provides for allowing advance ruling applications on the question of applicability of notifications issued under Chapter V. Given that this application pertains to the eligibility of CENVAT credit of excise duty paid on pipes and valves as Capital goods for providing output service i.e transport of goods through pipelines or conduit as a service provider as per the CENVAT Credit Rules, 2004 and the fact that the CENVAT Credit Rules, 2004 were introduced vide Notification No.23/2004-CE(NJT) issued inter alia under Section 94 of the Act which forms a part of Chapter V of the Act, this application would qualify under Section 96 (2)(d) which provides for allowing advance ruling applications on the question of applicability of notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct legal entities. The petitioner has not even entered into any transaction till date, whereas, the holding Company s transaction which is a subject matter before the Tribunal, is already completed. Merely because the nature of proposed business of the petitioner is similar to that of the holding Company, it does not imply that the proposed transaction of the petitioner would be identical to that undertaken by the holding Company. Therefore, the finding of the AAR that the aforesaid transactions are identical is bad in law as well as on facts. The AAR has rejected the Application filed by the petitioner in violation of Article 14 and Article 19(1)(g) of the Constitution. 26.10 In any case, Proviso to Section 96D(2) provides that the AAR is bound to reject the Application if the same question is pending before the Tribunal in applicant s own case. While rejecting the Application, the AAR in para 8 of the impugned order has held that an identical issue vis a vis an identical transaction is pending before the Tribunal. It is stated that the Application can be rejected only if the identical issue is pending before the Tribunal in the context of an identical transaction pattern. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner in his comments. Therefore, the view taken by the AAR that there were identical transactions of the petitioners and the petitioners holding Company and it would result in giving incompatible decisions on an identical question, is erroneous. 19. For the aforesaid reasons, we are of the considered opinion that the applications filed under Section 96C by the petitioners were rejected by the AAR on non-existent grounds. The AAR could not reject the applications of the petitioners under its discretionary power as there were no exceptional circumstances, or abuse of the legal process or rendering incompatible decisions concerning the same parties or any anomalous situations would have arisen if the AAR would have pronounced advance ruling. The petitioners had not yet entered into any transaction and the advance ruling had been sought on the proposed activity or service, therefore, the petitioners applications were maintainable and the AAR was required to pronounce advance ruling under section 96D of the Finance Act. Even assuming arguendo that the question pending before the CESTAT in the matter of holding company and the question raised before AAR by the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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