Whether A Judicial Member is a must for Advance Ruling Authority
20th February, 2018
The Gujarat High Court recently admitted a Special Civil Application NO. 18030 of 2017 filed by Nipun Praveen Singhvi relating to the Authority of Advance Ruling (AAR) and the Appellate Authority of Advance Ruling (AAAR) under the Central GST. The matter will be next heard on 13th April, 2018.
The application seeks that the High Court declare the relevant CGST provisions as ultra vires the Constitution as the Benches do not include a judicial member.
Traditionally, the Authority for Advance Rulings in the legacy taxes like central excise, customs and service tax have always included a Judicial member. So, this is a departure from the established practice. Also almost every tax tribunal (except single Benches) includes both a Technical Member and Judicial Member.
The Gujarat High Court has issued notices to the Central Government, the GST Council and the Gujarat Government.
In terms of Section 96 of the CGST Act, the Advance Ruling Authority set up under the State GST Act or UT GST Act will be deemed to be the AAR under CGST for that State or UT. The said section reads :
“96. Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.”
The corresponding provisions in the State GST Act (extract from AP GST Act) which set-out the modalities of constituting the AAR and the AAAR are contained in Section 96 and 99 respectively. The said sections prescribe constituting the AAR and AAAR by appointing officers from Central Tax and State Tax.
Section 96 reads :
"96. (1) The Government shall, by notification, constitute an Authority to be known as the Andhra Pradesh Authority for Advance Ruling:
Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State.
(2) The Authority shall consist of,-
(i) one member from amongst the officers of Central tax; and
(ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively.
(3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed."
Section 99 reads :
"99. The Government shall, by notification, constitute an Authority to be known as the Andhra Pradesh Appellate Authority for Advance Ruling for Goods and Services Tax for hearing appeals against the advance ruling pronounced by the Advance Ruling Authority consisting of,-
(i) the Chief Commissioner of Central tax as designated by the Board; and
(ii) the Chief Commissioner of State tax:
Provided that the Government may, on the recommendations of the Council, notify any Appellate Authority located in another State or Union territory to act as the Appellate Authority for the State."
It should be noted that the AAR and the AAAR under section 105 of the CGST Act will like the AARs in the legacy tax laws will also be a deemed Civil Court and will exercise powers under the Civil Procedure Code regarding discovery & inspection, enforcing attendance, issuing commissions and compelling production of records, accounts etc. Section 105 reads :
"105. (1) The Authority or the Appellate Authority shall, for the purpose of exercising its powers regarding—
(a) discovery and inspection;
(b) enforcing the attendance of any person and examining him on oath;
(c) issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908.
(2) The Authority or the Appellate Authority shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial proceedings within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code."
Apart from the Constitutionality, Advance Ruling is an important mechanism in taxation which reduces tax uncertainties. It creates a conducive transparent environment, encouraging investment. Creating tax certainty is especially important in the context of a new introduced GST which became effective from 1st July 2017. The quality of the orders from AAR will be considerably enhanced if expertise in Technical and Judicial aspects are drawn upon.