A move in the right direction but in a discriminating manner has been made by the Ministry of Finance in extending the facility of availing of advance ruling only for public sector. This has been extended to all sectors only in respect of import of projects, which are in the nature of a full plant such as power plant or paper plant. With regards to central excise and service tax the facility has not been extended to private sector at all. The real beneficiary is only the public sector. And for private sector it is only ‘a trickle down effect’!
The Standing Committee on Finance had suggested that the PSUs are allowed to take advance ruling facility for indirect taxes as they were already getting the benefit for direct taxes. This decision, therefore, now is obviously in pursuance of that recommendation. The implication of these notifications is that the Finance Ministry has enlarged the powers of the Advance Ruling Authority to include any public sector company. It has also been extended to private sector importers of projects under the Heading 9801 of the Customs Tariff.
I must say that this action has been very useful and desirable. In fact the demand of the general public has been that regular Indian Residents be should allowed to seek rulings from Advance Ruling Authority. Whereas the logic of extending this facility is unexceptionable, there is no reason why the government should differentiate between the private and public sector to this extent. It amounts to discrimination in favour of the public sector.
There are two aspects where the system of advanced ruling can be extended without much concern to the Finance Ministry. The first relates to assembly at site. Supposing ABB which is private firm wants to assemble a power plant for another private company, say, Tatas or Birlas, the Central Excise Department may call this assembly of plant at site a manufacture and ask the Tatas or Birlas to pay huge excise duty. This has been a subject matter of immense litigation already and there are many Supreme Court judgements and even a greater number of CBEC rulings. Even after that litigation continues. It would be a great advantage to the private sector if huge investments can be made by them without any chance of litigation.
I am aware of a case of a private company venturing into a new product for which it could not get a specific ruling from the Advance Ruling Authority. It got all the clarifications about the rate of duty that was possible for them to get as a private company. However, the moment it started production, show cause notice was issued to them asking for higher duty. They fought up to Commissioner Appeal and won the case. Revenue went to Tribunal and lost. So far it is not known whether Revenue has gone to the Supreme Court. This types of case shows that the facility of advance ruling should be extended to the private sector as well. There would be no harm done to the power of the CBEC since only the prospective investments will come for such ruling.
The conclusion is that extending the facility of advance ruling will free the taxpayers from the stranglehold of uncertainty. Litigation–oriented system suits the bureaucracy since such a system helps it to balloon itself. The Advance Ruling Authority has the potentiality to be a very useful organization to the great advantage of the Indian importers, manufacturers and service taxpayers. They deserve to be treated at par with public undertakings. I wonder why this private entrepreneur should be discriminated against the public sector entrepreneur.