When the concept of advance ruling was initiated, the idea was to facilitate the investors from abroad to get a quick clarification as to what would be the tax liability when they come to India. So the Authority for Advance Rulings was created under Sections 28E to 28M of the Customs Act, Section 23A to 23H of the Central Excise Act and Sections 245N to 245S of the Income Tax Act, which are all on similar lines. The Sections in these three Acts are similarly worded. In fact there is a common Authority for Advance Rulings now for all direct and indirect taxes under the central government.
The advance ruling is binding on the applicant and on the commissioner of Customs, Excise and Income Tax and the authorities subordinate to them in respect of the applicant. If the applicant or the commissioner is not satisfied with the ruling, he can file a special leave petition under Article 136 of the Constitution. That was the normal understanding from the wording of the Article 136, which lays down that the Supreme Court in its discretion grants special leave to appeal from any judgement, decree, determination, sentence or order in any case or matter passed or made by any court or tribunal in the territory of India. In a very recent case of Colombia Sportswear company vs. Director of Income Tax, Bangalore-2012(283)ELT321(SC), the Supreme Court has decided on the issue as to whether an advance ruling pronounced by the Authority can be challenged by the applicant or the commissioner under Articles 226 and 227 of the Constitution before the High Court or under Article 136 of the Constitution before the Supreme Court.
The Supreme Court in this case relied on the decision by a Constitution Bench of this Court in the case of L Chandra Kumar vs. UOI - 1997(92)ELT313(SC). In that case it was held that the power vested in the High Court to exercise judicial superintendence over the decisions of all Courts and Tribunal within their respective jurisdictions is a part of the basic structure of the Constitution. Therefore, the Supreme Court in the present case concluded that to hold that an advance ruling of the Authority should not be permitted to be challenged before the High Court under Article 226 and 227 of the Constitution would be to go against the basic structure of the Constitution. So the result of the decision is that the aggrieved party has to first go to the High Court (to a Single Judge and then to a Division Bench), and then to the Supreme Court which is the normal route and it is the route of delay.
The Supreme Court took into account the fact that the object of establishing the Advance Rulings Authority was to get an expeditious ruling in respect of the future transaction relating to investment in India. If there is a delay in getting the final decision, the investment would hesitate to come due to uncertainty. The Supreme Court, therefore, held that when an advance ruling of the Authority is challenged before the High Court under Article 226 or 227 of the Constitution, the same should be heard directly by a Division Bench of the High Court and decided as expeditiously as possible.
The Supreme Court, however, took notice of the fact that the Article 136 itself gives it the power to accept special leave petition "in its discretion". Therefore, it would accept special leave petition directly if there is a substantial question of general importance, or if a similar question is already pending before it. However, this principle is also applicable for all cases.
The conclusion is that the position of Authority for Advance Rulings becomes same as that of CESTAT, that is, the general Tribunal for Customs, Excise and Service Tax in regard to filing an appeal before High Court or Supreme Court. All of them have to go to the High Court and then to the Supreme Court. In the case of advance ruling, the special dispensation is that the appeal to High Court will go directly to a Division Bench and it is required to be decided expeditiously. So it is in a better position compared to CESTAT.
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