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15

ADVANCE RULING
15.1 Definitions
To facilitate the Non-resident / foreign investor in ascertaining his tax liability in terms of Central
Excise and Customs Duties, the scheme of Advance Ruling was incorporated in Chapter IIIA of the
Central Excise Act, 1944 with effect from 11-5-1999. This Chapter contains section 23A to section
23H setting out the provisions on advance ruling. Finance Act 2005 has renamed ‘Authority for
Advance Rulings’ as ‘Authority for Advance Rulings (Central Excise, Customs and service tax)’.
The provisions relating to advance ruling have been summarised as under:
15.1.1 Advance Ruling : Under section 23A(b) advance ruling means determination of
question of law or fact regarding liability to duty in relation to an activity* proposed to be
undertaken by the applicant.
*Activity means production or manufacture of goods [Section 23A(a)].
The above mentioned provisions imply that the advance ruling can be sought for the activity of
production/manufacture of goods, which is “proposed” activity and not an ongoing one. For
example, expansion of the existing plant by creating additional capacity cannot be considered
as proposed activity qualifying for a pronouncement of ruling.
15.1.2 Applicant: Section 23A(c) defines applicant to mean:
"applicant" means—
(i)

(a) a non-resident setting up a joint venture in India 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 joint venture in India; or
(iii) a resident falling within any such class or category of persons, as the Central
Government may, by notification in the Official Gazette, specify in this behalf,
and which or who, as the case may be, makes application for advance ruling under subsection(1) of section 23C.
The Central Government has notified Public Sector Company as notified person for the
purpose of this clause.

© The Institute of Chartered Accountants of India

(f) determination of the liability to pay duties of excise on any goods under the Act. (c) principles to be adopted for purpose of determining value of goods.Advance Ruling 15. no other matter can be referred for advance ruling. or authorized by the Central Government under sub-section (2A). 15. 1985 and any duty chargeable under any other law for the time being in force in the same manner as duty of excise leviable under the Act. advance ruling can be asked only for (a) classification of goods under the Tariff. CBE&C has clarified vide Circular No. The applicant may withdraw the application within 30 days from date of application. 1961 respectively [section 23A(f)]. “Indian Company” and “Foreign Company” shall have the meaning as in section 2(30). “Indian Company” and “Foreign Company “Non-resident”. (b) application of tariff notification issued under section 5A of the Act. the Central Excise Tariff Act.2004 that determination of a question as to whether a particular process amounts to manufacture is not within the scope of advance ruling. now in case of joint venture an application for advance ruling can be made only when one of the partners is non-resident. in respect of duties of excise under the Act. 779/12/2004 – CX dated 11. It would also be noted that as per section 23D(2). [Section 23C(4)].1. Apart from the above. 15.2 Meaning of public sector company A public sector company shall have the same meaning as is assigned to it in section 2(36A) of the Income Tax Act. 1962 [Section 23A (e)]. (d) notifications issued. constituted under subsection (1). Meaning of Non-resident”. Meaning of joint venture in India Here. applicants (whether resident or nonresident) who apply for such facility should not have the matter pending before the Appellate Tribunal or Court or if the same is already decided by Appellate Tribunal or Court. © The Institute of Chartered Accountants of India . Thus. The collaboration would mean either technical or financial collaboration. “joint venture in India” means a contractual arrangement whereby two or more persons undertake an economic activity which is subject to joint control and one or more of the participants or partners or an equity holder is a non-resident having substantial interest in such arrangement.3.2 Procedure for application for Advance Ruling Under section 23C. (e) admissibility of credit of excise duty paid or deemed to have been paid on the goods used in or in relation to the manufacture of the excisable goods.3 Authority: “Authority” means the Authority for Advance Rulings. of section 28F of the Customs Act. 2(26) and 2(23A) of the Income-tax Act. 1961.

UOI 2009 (236) ELT 223 (Del). Customs and Service Tax) The Authority can formulate its own procedure. Under section 23F. it can be proved that it was obtained by fraud or misrepresentation of facts. In UAE Exchange Center Ltd v. 1962.is payable along with the application. On receipt of application for advance ruling. 2.3 Constitution of Authority for Advance Ruling (Central Excise.15. it is binding only on the applicant who sought it for matters specified in section 23(C)(2) and on the Commissionerate in respect of the applicant. summons. 2500/. enforcing attendance. the High Court held that writ jurisdiction was invocable against advance rulings. Customs and Service Tax) on receipt of application [Section 23D] 1. The records shall be returnable after the ruling is given. the authority shall be situated at Delhi. Under section 23D(5). However. 15. examination under oath. a hearing has to be given before rejection. advance ruling will be void if. [Section 23G]. As per section 23E. This Authority can examine people on oath and compel production of documents like a Civil Court under Code of Civil Procedure. The status of the Advance Ruling Authority falls within the meaning of Article 227 of the Constitution of India. Hence. Change in the law or facts may however make the advance ruling obsolete.4 Procedure to be followed by Authority for Advance Ruling (Central Excise. Application is liable to be rejected in the following cases: (i) where the question raised in the application is already pending before any Central © The Institute of Chartered Accountants of India . the status of the Authority of Tribunal and is amenable to writ jurisdiction of High Courts. compelling production of books of account. The Authority has the sole discretion to accept or reject the application. on a representation from Commissioner or otherwise. Advance Ruling Authority is vested with the powers of civil court on inspection. the applicant can appear in person or through authorised representative as set out in section 35Q. the authority shall consist of a Chairperson who shall be retired judge of Supreme Court along with officer of Indian customs and excise service qualified to be a Member of the Board and officer of Indian Legal Service qualified to be Additional Secretary to Government of India. It is a civil court for purposes of section 195 of Code of Criminal Procedure and proceedings are deemed to be judicial proceedings under section 193 and 228 of the IPC. As per section 28F supra. Under section 28F of the Customs Act. the Authority shall forward a copy to the relevant Commissioner. etc.3 Central Excise An application fee of Rs. 15.

) Tex (India) Pvt.T 164 (A.L.A. A copy of such order should be given to the applicant and the Commissioner. 15.L.Writ jurisdiction invocable against advance rulings .A. 2004 (168) E. The Authority can further examine any material placed before it after admission of the application.L. it was held that the application for rectification of mistake is not maintainable as the error was not apparent from the record. 4. the Appellate Tribunal or any court. 2004 (168) E.5 Important judgments with regard to Advance Rulings Ruling by Advance Rulings Authority binding on applicant. 27 (AAR) Permalite Electricals (P) Ltd. It cannot be applied for any ongoing activity. It was held that.R. 495 (A.T.T. 5.4 Excise Officer. 6. Ltd. the question raised in application that has already been decided by the Appellate Tribunal and was not raised at the time of admission of application such plea cannot be entertained by the Authority. UOI 2009 (236) ELT 223 (Del)). Zuari Cement Ltd. The Authority should pronounce the final order within 90 days of receipt of application. 2009 (239) E.Advance Ruling 15.R) . For example: Expansion of existing manufacturing activity In this case.Article 226 of Constitution of India The advance ruling can be applied for only proposed activity. 3. or (ii) where the question raised is the same as in a matter already decided by any Appellate Tribunal or any court. The Authority shall pass an order admitting or rejecting the application. © The Institute of Chartered Accountants of India UAE Exchange Centre Ltd v. transaction on which ruling sought and the departmental officers concerned Jurisdiction of Courts not excluded by implication or otherwise . Copies of the order have to be given to the applicant and the Commissioner.