TaxTMI 
TaxTMI 
2012 (8) TMI 753
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....l Excise, Ahmedabad (for short the Commissioner). 3. The petitioners propose to provide service that would be taxable under the category of "Transport of goods through pipeline or other conduit service" under section 65(105)(zzz) of the Finance Act,1994. (for short the Finance Act). For providing service, the petitioners are required to lay pipeline for which they would be procuring pipes, get the pipes installed and commissioned along the identified route so as to connect the source to the destination. In this regard, the petitioners propose to grant various turnkey Engineering Procurement and Construction Contracts (for short the EPC Contracts) to EPC contractors. The contracts would involve supply of pipelines as well as installation and commissioning of the pipes to bring into existence the desired pipeline connecting 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 sup....
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....the Commissioner had raised an objection to the maintainability of the application filed by the petitioner on the ground that an identical issue raised by petitioners holding company was pending before the Customs, Excise and Service Tax Appellate Tribunal, (for short the CESTAT). The petitioner filed rejoinder on 8.2.2012 to the preliminary comments of the Commissioner. Additional comments were also submitted by the Commissioner on 30.1.2012. In response to the queries made by the AAR on 10.2.2012 the petitioners filed additional submissions on 15.2.2012 wherein the petitioners submitted that the matter was not pending before the CESTAT in the petitioners' own case as required by the proviso to section 96D(2) of the Finance Act. 8. The AAR exercising its discretionary power by order dated 30.3.2012 rejected the application 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....
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....revenue has raised a preliminary objection that order of AAR can only be challenged directly before the Apex Court in a Special Leave Petition and not before this court in writ petitions. He further urged that the impugned order passed by AAR under its discretion cannot be challenged or interfered with. He has supported the impugned order of the AAR. PRELIMINARY OBJECTION 12. We may consider the preliminary objection raised by the learned counsel for the respondent. Mr.Ravani, the learned counsel appearing for the revenue has fervently urged that these writ petitions are not maintainable and the order of AAR could only be challenged directly before the Apex Court in a Special Leave Petition and consequently, the writ petitions are to be dismissed for lack of jurisdiction. This argument of Mr.Ravani is devoid of any 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 Con....
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....an ultimate ruling under section 96D(4) of the Finance Act, relying on the decision of Authority for Advance Rulings constituted under the Income Tax Act,1961, In Re. Microsoft Operations Pte. Ltd. [2009] 310 ITR 408 (AAR). We propose to deal with this decision and the discretionary power of the Authority for Advance Rulings a little later. For deciding the first question it is necessary to extract section 96A of the Finance Act as under: Definition: 96A. In this Chapter, unless the context otherwise requires,- (a)"advance ruling" means the determination, by the Authority, of a question of law or fact specified in the application regarding the liability to pay service tax in relation to a service proposed to be provided, by the applicant; [(b) "applicant" means,- (i) (a) a non-resident setting 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 ....
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...." 13.2. Since the notification dated 20.8.2009 talks about section 2(36A) of the Income tax Act, 1961, therefore, it is necessary to extract the section which reads as under: "2(36A) of Income-tax Act,1961: Public sector company" means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in Section 617 of the Companies Act,1956 (1 of 1956)" Thus, this section of the Income Tax Act, 1961 links it to the Companies Act, 1956 (for short the Companies Act). Section 617 of the Companies Act is extracted below: "For the purposes of this Act, Government company means any company in which not less than fifty one per cent of the paid up share capital is held by the Central Government or by any State Government or Governments, or 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 t....
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....titioners have stated that tax evasion or tax avoidance was never the reason for creating separate legal entities. The area of operations of holding company and that of the petitioner companies are distinct and separate. The holding company is engaged in transportation of gas only within the State of Gujarat, whereas the petitioner companies were created for implementing free cross country pipelines projects awarded to the petitioners pursuant to an open tender floated by Petroleum and Natural Gas Regulative Board. The advance ruling given by AAR will be binding only between petitioners and the tax authorities in view of section 96E of the Finance Act, and will not help the cause of the holding company. It has also been stated that by virtue of section 617 of the Companies 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 ....
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....tion 96A(b) of the Finance Act. The applications filed by the petitioners before the AAR under section 96C were maintainable. SECOND QUESTION 14. We may now take up the second question whether the AAR had been conferred with any discretionary power to either allow or reject the application on the ground other than those prescribed by the proviso to sub-section (2) of section 96D of the Finance Act or the AAR should have decided the applications filed before it under section 96C if the embargo contained in the proviso to section 96D(2) were absent? The learned counsel for the petitioners had urged that section 96D(2) read along with its proviso establishes that the AAR may after examining the application and records called for, by order, either allow or reject the 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 al....
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....cise. (2) The Authority may, after examining the application and records called for, by order, either allow or reject the application: Provided that the Authority shall not allow the application where the question raised in the application is,- (a) already pending in the applicant's case before any Central Excise Officer, the Appellate Tribunal or any Court; (b) the same as in a matter already decided by the Appellate Tribunal or any Court: 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. (3) A copy of every order made 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 p....
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....r words, the proviso to Section 245R(2) does not have the effect of taking away the discretion to reject the application on other unspecified grounds. However, as said earlier, the exercise of discretion must be canalised on proper lines. Avoiding abuse of legal process, incompatible decisions concerning the same parties and anomalous situation are relevant considerations that guide the exercise of discretionary power to reject the application. ..." 14.5. For better understanding the aforesaid decision it is necessary to reproduce section 245R(2) of the Income Tax Act, 1961, as below: "Section 245R. PROCEDURE ON RECEIPT OF APPLICATION. (2) The Authority may, after examining the application and the records called for, by order, 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 i....
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....etween the same parties as the ruling is binding on the applicant and the department only in respect of the transaction in relation to which the ruling had been sought. The Authority for Advance Rulings (Income Tax) rejected the argument of Revenue on the ground that the legislature never envisaged a situation that roving inquiries would have to be made whether any question is pending anywhere in the country at the assessment or appellate stage and whether the contracts are of similar nature having similar terms. However, the provisions of section 245R(2) of the Income Tax Act, 1961 is not pari materia with section 96D(2) of the Finance Act, and as they stand, are different. 14.7. We are in complete agreement with 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....
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....or Court. 9. We are in respectful agreement with the view taken by the Authority for Advance Rulings (Income-tax) in the above quoted ruling and applying the principle accepted therein, hold that we should exercise our discretion not to allow this application under section 96D(4) of the Act. We thus, reject these applications in exercise of our discretion." 14.9. The question arises that where either of the two conditions laid down in proviso to section 96D(2) barring the jurisdiction of the AAR are absent whether the AAR could reject the application filed under section 96C under its discretionary power, even though their was no exceptional circumstances? We have already held that 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. It is not disputed by the AAR in the impugned order that in the instant case that the question raised ....
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....sion would have resulted in incompatible decisions concerning the same parties. Further, the decision of the AAR would not have resulted in anomalous situations. The questions raised in the applications of the petitioners were required to be decided by the AAR. CONSIDERATION OF FACTS ON RECORD 15. We may now consider the facts on record. In the application filed by the petitioners under section 96C of the Finance Act, the petitioners have stated that the proposed business activity is at a preliminary stage of development and the necessary authorizations are being obtained. The Commissioner in his comments dated 22.12.2011 submitted before the AAR in paragraph 2 and 3 stated as under: "2. In this 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 S....
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....herefore, the issue could not fall under the purview of Advance Ruling." 15.2. The petitioner filed a rejoinder to the preliminary comments submitted by the Commissioner before the AAR, wherein in paragraph 2(i), 3.4 and 3.7, it had been stated as under: "2. That the Ld. Commissioner has essentially stated the following in his comments (i) In paragraph 2 (i) of the comments, the Ld. Commissioner accepts that the Applicant would qualify as an 'Applicant' within the meaning of Section 96A(b)(iii) of the Finance Act, 1994 read with the Notification 27/2009-ST. ........................................................................ ............ 3.4. That it is an undisputed fact that the question raised in the application is neither 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 ....
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..................................................." 15.4. The paragraphs 26.9.6 and 26.10 of the writ petition No. 6914 of 2012 which are similar to paragraph 26.9.6 and 26.9.7 in writ petition No.6869 of 2012. In paragraph 26.9.6 and paragraph 26.10 of writ petition No. 6914 of 2012, it had been stated as under: "26.9.6 That the transaction involved in the dispute pending in the case of the holding Company of the petitioner is not identical to the proposed transaction based on which the advance ruling has been sought by the petitioner. It is stated that the transaction details of the matter pending before the Tribunal were not available with the AAR and thus the AAR erred in holding that the two transactions are identical. The holding company and the petitioner are two separate and distinct 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 th....
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....ions raised by AAR had answered that the question raised by the petitioners in their applications were not identical to that raised by the petitioners holding Company Gujarat State Petronet Ltd. 18. That the AAR has rejected the applications of the petitioners by which advance ruling was sought on the ground that the transaction of the petitioners and the holding Company were identical. It appears that the AAR has lost sight of the fact that if the petitioners would have entered into any transaction, then their application for obtaining advance ruling was not maintainable. The advance ruling is sought on the question, before any activity or service as proposed by the applicant has commenced. Further, the petitioners had not yet entered into any transaction and this fact was not disputed 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 ....