BORN IN INDIA I SERVED FROM INDIA I TO THE GLOBE

Dated: 14.02.2024

Appeal against Customs Advance Ruling order- The Legal standpoint

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 investors/businesses 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 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 an 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.

Extracts of Article 226/227 of the Indian Constitution:

Article 226: Power of High Courts to issue certain writs

(1) Notwithstanding anything in article 32 every High Court shall have powers, throughout the territories in relation to which it exercise jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warrantor and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. (1-A) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.”; was inserted after 15th Amendment.

Editorial comment- The Constitution (Fifteenth Amendment) Act, 1963, this was amended to include clause (1A). It states that the High Court, whose territorial jurisdiction the cause of action originates under, may also have the ability to issue directives, orders, or writs to any government, authority, or person, even if their seat or place of abode is beyond the high court’s territorial jurisdiction.

(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the scat of such Government or authority or the residence of such person is not within those territories.

(3) Where any party against whom an interim order, whether by way of injunction or stay or in any other manner, is made on, or in any proceedings relating to, a petition under clause (1), without–(a)furnishing to such party copies of such petition and all documents in support of the plea for such interim order; and(b)giving such party an opportunity of being heard, makes an application to the High Court for the vacation of such order and furnishes a copy of such application to the party in whose favour such order has been made or the counsel of such party, the High Court shall dispose of the application within a period of two weeks from the date on which it is received or from the date on which the copy of such application is so furnished, whichever is later, or where the High Court is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court is open; and if the application is not so disposed of, the interim order shall, on the expiry of that period, or, as the case may be, the expiry of the said next day, stand vacated.

(4) The power conferred on a High Court by this article shall not be in derogation of the power conferred on the Supreme Court by clause (2) of article 32.

Editorial comment-The Constitution (Forty-Third Amendment) Act, 1977, * The Constitution’s Article 226(A) shall be deleted. * Before the implementation of this Act, the High Court may handle any cases that were pending before it under article 226 of the Constitution. As if the afore mentioned article 226(A) had been deleted as of February 1st, 1977.

Editorial comment- The Constitution (Forty-Fourth Amendment) Act, 1978, repealed Article 19 (1) (f) and also took out Article 31(1) has been taken out of Part III and made a separate Article 300A in Chapter IV of Part XII. This amendment may have taken away the scope of speedy remedy under Article 32 for the violation of Right to Property because it is no more a Fundamental Right. Making it a legal right under the Constitution serves two purposes: Firstly, it gives emphasis to the value of socialism included in the preamble and secondly, in doing so, it conformed to the doctrine of basic structure of the Constitution.

Article 227: Power of Superintendence over all courts by the High Court

(1) Every High Court shall have superintendence over all courts and tribunals throughout the territories interrelation to which it exercises jurisdiction.

(2) Without prejudice to the generality of the foregoing provisions, the High Court may–(a) call for returns from such courts; (b) make and issue general rules and prescribe forms for regulating the practice and proceedings of such courts; and (c) prescribe forms in which books, entries and accounts shall be kept by the officers of any such courts.

(3) The High Court may also settle tables of fees to be allowed to the sheriff and all clerks and officers of such courts and to attorneys, advocates and pleaders practicing therein: Provided that any rules made, forms prescribed or tables settled under clause (2) or clause (3) shall not be inconsistent with the provision or any law for the time being in force, and shall require the previous approval of the Governor.

(4) Nothing in this article shall be deemed to confer on a High Court power of superintendence over any court or tribunal constituted by or under any law relating to the Armed Forces.

Editorial comment-The Constitution (Forty-Fourth Amendment) Act, 1978, repealed Article 19 (1) (f) and also took out Article 31(1) has been taken out of Part III and made a separate Article 300A in Chapter IV of Part XII. This amendment may have taken away the scope of speedy remedy under Article 32 for the violation of Right to Property because it is no more a Fundamental Right. Making it a legal right under the Constitution serves two purposes: Firstly, it gives emphasis to the value of socialism included in the preamble and secondly, in doing so, it conformed to the doctrine of basic structure of the Constitution.

Extract of Article 136 of the Indian Constitution:

Article 136: Special leave to appeal by the Supreme Court

• Not with standing anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.

• Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.

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