Public limited cos get advance ruling access under Customs

Resident public limited companies have good news. They can now seek advance rulings under the Customs Act, 1962. The finance ministry issued a notification number 67/2011-Customs (NT) dated September 22, bringing them within the ambit of Section 28E of the Customs Act, 1962.

For persons who want to be clear about tax liability before venturing into any taxable activity, the advance ruling mechanism gives an option to make an application to the Authority for Advance Ruling and obtain a ruling. As the ruling is binding on the party seeking the ruling and the government, the mechanism brings certainty in determining the tax liability. It helps avoid long-drawn and expensive litigation at a later date. Seeking an advance ruling is inexpensive, and the procedure is simple and expeditious.

 

Under the Customs law, advance ruling can be sought on the issues of classification, applicability of any exemption notification, principles of valuation, applicability of notifications issued in respect of duties under the Customs Act, 1962, Customs Tariff Act, 1975, and any duty chargeable under any other law for the time being in force in the same manner as duty of Customs under the Customs Act, 1962, determination of origin of goods in terms of the rules notified under the Customs Tariff Act of 1975 and matters related thereto and assessments under project import regulations under Heading 98.01 of the customs tariff.

The advance ruling facility was restricted to any person who is a non-resident setting up a joint venture in India in collaboration with a non-resident or a resident, any person who is a resident setting up a joint venture in India in collaboration with a non-resident, a wholly-owned subsidiary Indian company of which the holding company is a foreign company, a joint venture in India or a resident who proposes to import any goods under specified preferential or free trade agreements. In 2009, public sector companies were also allowed to seek advance ruling.

Now, the government has thrown the facility of seeking advance ruling open to all resident public limited companies. The notification of September 22 says a ‘public limited company’ shall have the same meaning as is assigned to a “public company” in clause (iv ) of sub-section (1) of section 3 of the Companies Act, 1956 (1 of 1956) and shall include a private company that becomes a public company by virtue of section 43A of the said Act, and that a ‘resident’ shall have the same meaning as is assigned to it in clause (42) of section 2 of the Income tax Act, 1961, (43 of 1961) in so far as it applies to a company.

This new facility is an overdue measure that gives the wholly Indian-owned companies also an important option to seek binding rulings whenever there is a doubt rather than risk litigation at a later stage. They must, however, take note that there is no provision for appeal against a ruling of the Advance Ruling Authority.

Recourse to advance ruling is available under the laws relating to central excise and service tax also. The finance ministry must consider giving recourse to advance ruling to resident public limited companies under those laws also. Further, the ministry should enable exporters get advance ruling on issues relating to duty drawback, so that they can also conduct their business with greater certainty.

Email : tncr@sify.com