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Service Tax Law on Advance Ruling

INTRODUCTION

Advance rulings would assure non-resident investors of  their Service tax liability on the taxable services  proposed to be provided by them in India.

2.

The  scheme   of   Advance    Rulings   allows   a   non-resident  investor  setting up a joint venture in India in collaboration with a non-resident  or a resident, or a resident  setting up a joint venture in India in collaboration with a non-resident,  to seek in advance, a ruling from the Authority for Advance Rulings.  A wholly owned subsidiary Indian company, of which the holding company is a foreign company, can also seek such  rulings. The rulings can be sought in respect of -

(a) Classification of taxable services under Chapter V of the Finance Act, 1994 (Service Tax);
  (b) Valuation of taxable services for charging Service Tax under the Finance Act, 1994;
  (c) Applicability of notifications issued under Chapter V of Finance Act 1994.
  (d) Admissibility of credit of Service Tax under Chapter V of the Finance Act, 1994. 
3. Relevant  provisions  relating  to  Advance  Rulings  in  Service  tax law  are incorporated in Chapter VA of the Finance Act,1994  (as amended by Finance Act, 2003) and are reproduced below:

PROVISIONS OF FINANCE ACT, 1994 ON ADVANCE RULINGS 

 

CHAPTER V A OF FINANCE ACT, 1994 

 

ADVANCE RULINGS

SECTION 96A.Definitions. In this Chapter, unless the context otherwise requires,-

(a) advance ruling means the determination, by the Authority, of a question of law or fact specified in the application regarding the liability to pay service tax in relation to a service proposed to be provided, by the applicant;

(b) 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 sub-section (1) of section 96C;

Explanation. For the purposes of this clause, 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 equity holders is a non-resident having substantial interest in such arrangement;

(c) application means an application made to the Authority under sub-section (1) of section 96C;

(d) Authority means the Authority for Advance Rulings, constituted under sub-section (1),or authorised by the Central Government under sub-section (2A), of section 28F of the Customs Act, 1962 (52 of 1962);

(e) non-resident, Indian company and foreign company have the meanings respectively assigned to them in clauses (30), (26) and (23A) of section 2 of the Income-tax Act, 1961 (43 of 1961);

(f) words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 (1 of 1944) or the rules made there under shall apply, so far as may be, in relation to service tax as they apply in relation to duty of excise.

SECTION 96B.Vacancies, etc., not to invalidate proceedings. No proceeding before, or pronouncement of advance ruling by, the Authority under this Chapter shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.

SECTION 96C.Application for advance ruling. (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and in such manner as may be prescribed, stating the question on which the advance ruling is sought.

(2)The question on which the advance ruling is sought shall be in respect of, -

(a) classification of any service as a taxable service under Chapter V;

(b) the valuation of taxable services for charging service tax;

(c) the principles to be adopted for the purposes of determination of value of the taxable service under the provisions of Chapter V;

(d) applicability of notifications issued under Chapter V;

(e) admissibility of credit of duty or tax in terms of the rules made in this regard;

(f) determination of the liability to pay service tax on a taxable service under the provisions of Chapter V.

(3)The application shall be made in quadruplicate and be accompanied by a fee of two thousand five hundred rupees.

(4)An applicant may withdraw an application within thirty days from the date of the application.

SECTION 96D.Procedure on receipt of application. (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner of Central Excise and, if necessary, call upon him to furnish the relevant records :

Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the Commissioner of Central Excise.

(2)The Authority may, after examining the application and the records called for, by order, either allow or reject the application :

Provided that the Authority shall not allow the application where the question raised in the application is, -

(a) already pending in the applicants case before any Central Excise Officer, the Appellate Tribunal or any Court;

(b) the same as in a matter already decided by the Appellate Tribunal or any Court :

Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard :

Provided also that where the application is rejected, reasons for such rejection shall be given in the order.

(3)A copy of every order made under sub-section (2) shall be sent to the applicant and to the Commissioner of Central Excise.

(4)Where an application is allowed under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority, pronounce its advance ruling on the question specified in the application.

(5)On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative.

Explanation >. - For the purposes of this sub-section, authorised representative has the meaning assigned to it in sub-section (2) of section 35Q of the Central Excise Act, 1944 (1 of 1944).

(6)The Authority shall pronounce its advance ruling in writing within ninety days of the receipt of application.

(7)A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner of Central Excise, as soon as may be, after such pronouncement.

SECTION 96E.Applicability of advance ruling. (1) The advance ruling pronounced by the Authority under section 96D shall be binding only -

(a) on the applicant who had sought it;

(b) in respect of any matter referred to in sub-section (2) of section 96C;

(c) on the Commissioner of Central Excise, and the Central Excise authorities subordinate to him, in respect of the applicant.

(2)The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.

SECTION 96F.Advance ruling to be void in certain circumstances. (1) Where the Authority finds, on a representation made to it by the Commissioner of Central Excise or otherwise, that an advance ruling pronounced by it under sub-section (4) of section 96D has been obtained by the applicant by fraud or misrepresentation of facts, it may, by order, declare such ruling to be void ab > initio and thereupon all the provisions of this Chapter shall apply (after excluding the period beginning with the date of such advance ruling and ending with the date of order under this sub-section) to the applicant as if such advance ruling had never been made.

(2)A copy of the order made under sub-section (1) shall be sent to the applicant and the Commissioner of Central Excise.

SECTION 96G.Powers of Authority. (1) The Authority shall, for the purpose of exercising its powers regarding discovery and inspection, enforcing the attendance of any person and examining him on oath, 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 (5 of 1908).

(2)The 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 (2 of 1974), and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code (45 of 1860).

SECTION 96H.Procedure of Authority. The Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure in all matters arising out of the exercise of its powers under this Act.

SECTION 96-I.Power of Central Government to make rules. (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Chapter.

(2)In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :-

(a) the form and manner for making application under sub-section (1) of section 96C;

(b) the manner of certifying a copy of advance ruling pronounced by the Authority under sub-section (7) of section 96D;

(c) any other matter which, by this Chapter, is to be or may be prescribed.

(3)Every rule made under this Chapter shall be laid, as soon as may be, after it is made, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Ministry of Finance
(Department of Revenue)

Notification No. 17 / 2003 - Service Tax (N.T.)

New Delhi, the 23rd July, 2003

SERVICE TAX (ADVANCE RULINGS) RULES, 2003 

            In exercise of the powers conferred by section 96-I read with sub-sections (1) and (3) of section 96C, sub-section (7) of section 96D of the Finance Act, 1994 (32 of 1994) the Central Government hereby makes the following rules, namely: - 

1. Short , extent and commencement. (1) These rules may be called the Service Tax (Advance Rulings) Rules, 2003.
  (2) They extend to the whole of India , except the State of Jammu and Kashmir.
  (3) They shall come into force on the date of their publication in the Official Gazette. 
2. Definitions. - In these rules, unless the context otherwise requires,-
  (a) "Act" means the Finance Act, 1994 (32 of 1994);
  (b) "Authority" means the Authority for Advance Rulings (Central Excise, Customs and Service Tax) constituted under section 28F of the Customs Act, 1962 (52 of 1962);
  (c) "Form- Application for Advance Ruling  (Service Tax) means the form annexed to these rules;
  (d) Words and expressions used and not defined herein but defined in the Act shall have   the meanings respectively, assigned, to them in the Act.
3. Form and manner of application. - (1)  An application for obtaining an advance ruling under sub-section  (1) of section 96C of the Act shall be made in Form- Application for Advance Ruling  (Service Tax).  
  (2)The application referred to in sub-rule (1), the verification contained therein and all relevant documents accompanying such application shall be signed, - 
  (a) in the case of an individual, by the individual himself, or where the individual is absent from India, by the individual concerned or by some person duly authorized by him in this behalf; and where the individual is a minor or is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf;
  (b) in the case of a Hindu undivided family, by the Karta of that family and, where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of that family;
  (c) in the case of a company or local authority, by the principal officer thereof authorized by the company or the local authority, as the case may be, for such purpose;
  (d) in the case of a firm, by any partner thereof, not being a minor;
  (e) in the case of an association, by any member of the association or the principal officer thereof; and
  (f) in the case of any other person, by that person or some person competent to act on his behalf. 
  (3) Every application shall be filed in quadruplicate and shall be accompanied by a fee of two thousand five hundred rupees.
4. Certification of copies of the advance rulings pronounced by the Authority.- A copy of the advance ruling pronounced by the Authority for Advance Rulings  and duly signed by the Members to be sent to each of the applicant and to the Commissioner of Central Excise under sub-section (7) of section 96D of the Act,  shall be certified to be true copy of its original by the Commissioner, Authority for Advance Rulings, or any other officer duly authorized by the Commissioner, Authority for Advance Rulings, as the case may be.

FORM AAR (ST-I)

[Application for Advance Ruling (Service Tax)]

(See rule 3 of the Service Tax (Advance Rulings) Rules, 2003) 

BEFORE THE AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS AND SERVICE TAX)
NEW DELHI

(Form of application for seeking Advance Ruling under Section 96C of the Finance Act, 1994.) 

Application Number of  

1. Details of Applicant    
  (i)      Full name :  
(ii)     Complete address       :  
(iii)     Telephone number( with STD/ISD code) :  
(iv)     Fax number (with STD/ISD code) :  
(v)     E-mail address :  
(vi)    Postal address ( to be  provided if different from (ii) above)      
2. Status of the Applicant(Tick whichever is applicable)    
  i.                     (i)  a non-resident setting up a joint venture in India in collaboration with,- ii.                   (a) a non-resident; or iii.                    (b) with a resident; :  
iv.                 (ii)    a resident setting up a joint venture  in India in collaboration with a non-resident; :  
v.                   (iii)    a wholly owned subsidiary Indian company, of which the holding company is a foreign company; :  
vi.                 (iv)    a joint venture in India; vii.                  :  
(v) 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 (mention notification number). :  
3. Basis for claim as a proposed joint venture [ref. 2(i) & (ii) above] (furnish copy of following).    
  (a)   Memorandum of Understanding; or   :  
(b) Letter of Intent; or   :  
( c) Articles of Association etc.; or   :  
(d)   Any other document.   :  
4. Details of proposed joint venture    
  (i)      Full name :  
(ii)     Complete address       :  
(iii)     Telephone number( with STD/ISD code) :  
(iv)    Fax number (with STD/ISD code) :  
(v)     E-mail address    
(vi)    Postal address( to be filled if different from (ii)  above) :  
5. Details of resident/non-resident party other than the applicant forming the Joint Venture    
  (i)      Full name :  
(ii)     Complete address       :  
(iii)     Telephone number( with STD/ISD code) :  
(iv)     Fax number (with STD/ISD code) :  
(v)     E-mail address :  
(vi)    Postal address( to be filled if  different from (ii)  above) :  
6. In case of a wholly owned Indian Subsidiary Company furnish the following details:-    
A. (i)     Name of Foreign holding company :  
(ii)     Complete address       :  
(iii)     Telephone number( with STD/ISD code) :  
(iv)     Fax number (with STD/ISD code) :  
(v)     E-mail address :  
(vi)    Postal address( to be provided if  different from (ii) above)   :  
B. Percentage of Foreign holding in the Indian Subsidiary Company. :  
7. In case of a joint venture [ref. 2(iv) above]    
  (i)   The persons forming the joint venture/ constitution of joint venture. :  
(ii)   Status of constituent persons, i.e. resident/non-resident. :  
(iii)  Existing activities if any. :  
8. Nature of business activity/ service proposed to be undertaken. :  
9. Present status of business activity/ service. :  
10. Registration number of the applicant as mentioned at serial number 1 under rule 4 of the   Service Tax Rules, 1994 (if any). :  
11. Permanent Account Number (Income Tax) of the applicant (if any). :  
12. Question of Law or fact on which Advance Ruling required (Tick whichever is applicable and provide details against ticked  item):-    
  (i)   Classification of any service as a taxable service under Chapter  V of the Finance Act, 1994;  :  
(ii)   the valuation of taxable services for charging service tax;   :    
  (iii) the principles to be adopted for the purposes of determination of value of the taxable service under the   provisions of   Chapter V of the Finance Act, 1994;   :  
(iv)   applicability of notifications issued under Chapter V of the Finance Act, 1994;   :  
  (v)  admissibility of credit of service tax; :  
  (vi) determination of the liability to pay service tax on a taxable service under the provisions of Chapter V of the Finance Act, 1994. :  
13. Statement of relevant facts having a bearing on the question(s) raised :  
14. Statement containing the applicants interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicants view point and submissions on issues on which the advance ruling is sought). :  
15. Whether the question(s) raised is/are pending in the applicants case before any officer of Service Tax/Central Excise, Appellate Tribunal or any Court of Law? If so, provide details. :  
16. Whether a similar matter as raised in the question(s) by the applicant has already been decided by the Appellate Tribunal or any Court? :  
17. Concerned Commissioner(s) of Service Tax / Central Excise having jurisdiction in respect of the question referred at serial number 12. :  
18. List of documents/statement attached, (attach the list on a separate sheet, if necessary. :  
19. Particulars of demand draft enclosed with the application :  

 (Applicants signature)

 VERIFICATION 

            I, ____________________(name in full and in block letters), son/daughter/wife of ___________________ do hereby solemnly declare that to the best of my knowledge and belief what is stated above and in the annexure(s), including the documents are correct. I am making this application in my capacity as ___________________ (designation) and that I am competent to make this application and verify it.   2.         I also declare that the question (s) on which the advance ruling is sought is/are not pending in my case before any Central Excise/Service Tax  Authority, Appellate Tribunal or any Court. 3.         Verified this.day..of.200   at 

(Applicants signature) 

ANNEXURE I

 Statement of the relevant facts having a bearing on the question(s) on which the advance ruling is required  

Place ..   Date

(Applicants signature)

ANNEXURE II

 

Statement containing the applicant"s interpretation of law and/or facts, as the case may be, in respect of the questions(s) on which advance ruling is required   Place .. Date

(Applicants signature)

Notes:

1. The application must be filled in English or Hindi, in quadruplicate.
2. The application must be accompanied by an account payee demand draft of Indian Rupees two thousand five hundred drawn in favour of Authority for Advance Rulings(Central Excise, Customs & Service Tax), payable at New Delhi.  Particulars of the draft should be entered in the column pertaining to item number 19.
3. The number and year of receipt of the application will be filled in by the office of the Authority for Advance Rulings.
4. If the space provided for answering any item in the application is found insufficient, separate sheets may be used for this purpose. Each sheet must be signed at the bottom by the applicant.
5. In reply to item number 2 the applicant must state its status i.e. whether an individual, Hindu undivided family firm, company, firm association of persons, wholly owned subsidiary, Joint Venture or any other person.
6. For item number 5, the reply must be given in the context of the provisions regarding "residence" in India, non resident, Indian Company, and  Foreign Company as per the Income Tax Act, 1961(43 of 1961).
7. In reply to item number 9, the applicant must state the present status of the business activity/service in respect of which advance ruling has been sought i.e. the stage to which it has progressed.
8. Regarding item number 12, the question(s) should be based on the business activity/service proposed to be under taken; hypothetical questions will not be entertained.
9. In respect of item number 13, the applicant must state in detail the relevant facts and also disclose the nature of his business activity/service and the likely date and purpose of the proposed business activity/service(s).  Relevant facts reflected in document submitted along with the application must be included in the statement of facts and not merely incorporated by reference.
10. For item number 14, the applicant must clearly state his interpretation of law or facts in respect of the question(s) on which the advance ruling is being sought.
11. The application, the verification appended thereto, the Annexures to the application and the statements and documents accompanying the Annexures 1 and 2 must be signed on each page by the applicant.