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Obvious Infirmities in the Determination of Value of Supply Rules

MAY 08, 2017

By RK Singh

EVEN a cursory glance at the Determination of Value of Supply Rules reveals the following untenable legal infirmities therein.

1.Rule  1(d) reads as under

1(d).if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by application of rule 4 or rule 5 in that order.

Similarly Rule 2(c) states that:

2(c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 4 or rule 5, in that order:

The above-quoted clauses obviously mean that one can proceed to Rule 5 only if Rule 4 is of no avail for the purpose of determination of value. However proviso to Rule 5 states that in case of supply of services the supplier may opt for this rule disregarding Rule 4. By virtue of the fact that one has to proceed sequentially from Rule 4 to Rule 5, it is not possible to disregard Rule 4 on the basis of the proviso to Rule 5 because one cannot go to Rule 5 without first declaring Rule 4 inapplicable. It is thus obvious that this proviso is misplaced in Rule 5. It should be incorporated in Rule 4 to state that in case of supply of services the supplier may opt for Rule 5 disregarding this Rule.

2. Similar legal infirmity has crept in 6(1) which begins as under:

"Notwithstanding anything contained in the Act or in these rules…"

It means that the provisions of Rule 6 will prevail over the provisions of the Act in case of any conflict. It is trite to say that rules cannot go beyond the scope of the Act under which they are framed. Thus the expression 'Not with standing anything contained in the Act" would make this Rule ultra vires the very Act under which it is framed. This faux pas needs immediate correction by modification of the opening words of Rule6(1) as under:

"Notwithstanding anything contained in these rules..."

The policy makers may like to make these corrections sooner than later to avoid disputes and litigation.

(The author is former Chief Commissioner & Member (Technical) CESTAT. The views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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