2009 (9) TMI 56 - AAR - Customs

AAR allows imports during advance ruling application process, maintains eligibility despite subsequent events

The Authority for Advance Rulings (AAR) rejected the Department's objections and decided to proceed with the application for advance ruling. The AAR held ... Advance ruling - proposed activity - activity - date of filing of the application - maintainability of application - bar of a matter being 'already pending' - liberal construction of remedial provisionsActivity - proposed activity - advance ruling - Import of sample quantities prior to filing the application does not defeat the character of the activity as a 'proposed activity' for purposes of seeking advance ruling. - HELD THAT: - The Authority held that nominal imports of samples not intended for sale or other commercial use do not bring the goods into the importer's commercial stream and therefore are not 'activity' contemplated by the definition in Section 28E. A narrow, literal construction that treats any import, however small or non-commercial, as depriving an applicant of the right to seek advance ruling would frustrate the remedial purpose of the provision. The decision in Arisaig Partners was distinguished on its facts because there the applicant had been providing chargeable services on a continuing basis and had not substantiated a 'trial run' claim. Vague comments by customs officers alleging 'a few imports' were held insufficient to place the Authority on notice of pre-filing commercial importation. [Paras 5]Pre-filing imports of samples not for sale do not make the activity other than 'proposed' and do not render the application for advance ruling non-maintainable.Date of filing of the application - maintainability of application - advance ruling - liberal construction of remedial provisions - Commencement of imports after filing the application does not, by itself, make the application for advance ruling non-maintainable or liable to be revoked. - HELD THAT: - The Authority construed the statutory scheme to require that entitlement to seek an advance ruling be judged with reference to the factual position as of the date of filing the application. The order under Section 28I(2) admitting the application is a prelude to examination on merits; subsequent commencement of the business activity during pendency does not automatically invalidate the application or permit review of the admission order. Requiring applicants to refrain from commencing business until final disposal would frustrate the purpose of advance rulings; the Act contains no provision for continuous reconsideration of admissibility during pendency. The Authority referred to analogous advance-ruling jurisprudence under the Income-tax law to support the construction that the 'proposed activity' requirement is assessed as at filing date. [Paras 6, 7, 8]An applicant who satisfied the statutory criteria on the date of filing remains entitled to have the application heard notwithstanding subsequent commencement of imports or business activity.Bar of a matter being 'already pending' - date of filing of the application - maintainability of application - A proceeding or show-cause notice initiated after the date of filing cannot be treated as rendering the application 'already pending' under the proviso to Section 28I(2); the relevant time for that bar is the date of filing the application. - HELD THAT: - The Authority examined the proviso to Section 28I(2) and concluded the expression 'already pending' must be interpreted with reference to the filing date so as to prevent deliberate initiation of proceedings after an application is filed from defeating the remedy. Facts showing the show-cause notice in the present case were issued after the order admitting the application (and were not communicated to the Authority before admission) reinforced the need to adopt the filing-date test. Precedents from advance-ruling authorities under the Income-tax Act were followed to the same effect, emphasizing that the embargo operates only where, on the date of filing, the question was already pending before the revenue authorities, tribunal or court. [Paras 9]A proceeding initiated after the application was filed does not trigger the proviso bar; maintainability is to be assessed as on the date of filing.Final Conclusion: The miscellaneous applications filed by the Revenue seeking recall or rejection of the admission order were rejected. The Authority ruled that (i) pre-filing sample imports not for sale do not defeat the 'proposed activity' requirement, (ii) commencement of imports after filing does not render the application non-maintainable, and (iii) the proviso bar that a question be 'already pending' is to be tested as at the date of filing; consequently the advance ruling application was properly admitted and the Revenue's challenges lacked merit. Issues Involved:1. Whether the Authority for Advance Rulings (AAR) can proceed with the application for advance ruling despite the Department's objections.2. Whether the import of goods as samples before filing the application disqualifies the applicant from seeking an advance ruling.3. Whether subsequent imports during the pendency of the application affect the eligibility for advance ruling.4. Whether the issuance of a show cause notice after the filing of the application affects the maintainability of the application.Detailed Analysis:1. Whether the Authority for Advance Rulings (AAR) can proceed with the application for advance ruling despite the Department's objections:The Department filed miscellaneous applications under Regulations 11 and 18 of the Authority for Advance Rulings (Central Excise, Customs and Service Tax) Procedure Regulations, 2005, arguing that the AAR should not proceed with the application as it is liable to be rejected in limine. The Department contended that there were mistakes of fact or law in the order of admission. However, the AAR found no merit in these preliminary points, stating that the import of goods as samples for non-commercial purposes does not affect the eligibility to apply for advance ruling. The AAR emphasized that a narrow construction of the provision goes against its spirit and rationale.2. Whether the import of goods as samples before filing the application disqualifies the applicant from seeking an advance ruling:The Department argued that the applicant had imported goods before filing the application, which should disqualify them from seeking an advance ruling. The AAR noted that the import of goods as samples, which were not meant for sale or commercial purposes, should not be considered in determining whether the activity remains a proposed activity. The AAR held that importing a small quantity as samples for statutory authorities or market study does not forfeit the eligibility to apply for advance ruling. The AAR rejected the narrow interpretation suggested by the Department, stating that the import contemplated under Section 28 E is an import of goods in commercial quantities.3. Whether subsequent imports during the pendency of the application affect the eligibility for advance ruling:The Department contended that even imports made subsequent to the date of the application should be considered in determining whether the activity is a proposed activity. The AAR rejected this contention, stating that the eligibility for advance ruling should be judged with reference to the date of filing the application. The AAR emphasized that the applicant's eligibility should not be affected by imports made during the pendency of the application. The AAR stated that the essence of advance ruling is not changed by the applicant entering into business during the pendency of the application.4. Whether the issuance of a show cause notice after the filing of the application affects the maintainability of the application:The Department argued that a show cause notice issued after the filing of the application should bar the AAR from proceeding with the application. The AAR found no merit in this objection, stating that the date of filing the application is the relevant date for considering the validity and maintainability of the application. The AAR noted that the show cause notice was issued after the application was filed and that the Authority had not been apprised of the notice before passing the order admitting the application. The AAR reiterated that the pendency of proceedings should be determined with reference to the date of filing the application, and subsequent initiation of proceedings cannot bar the hearing on merits.Conclusion:The AAR concluded that the miscellaneous applications filed by the Department lacked merit and substance. The AAR held that the import of goods as samples before the filing of the application and subsequent imports during the pendency of the application do not affect the eligibility for advance ruling. The AAR also held that the issuance of a show cause notice after the filing of the application does not affect its maintainability. Therefore, the AAR rejected the miscellaneous applications and decided to proceed with the hearing on merits.