RELEVANT INTERPRETATION PRINCIPLES FOR SERVICE TAX (PART- V)

[Dr. Sanjiv Agarwal]

Proviso

A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the Section and is required to be read into the Section to give the Section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the Section as a whole. [Allied Motors Private Limited Versus Commissioner of Income-Tax - 1997 (3) TMI 9 - SUPREME Court].

The law with regard to provisos is well-settled and well-understood. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. [Shah Bhojraj Kuverji Oil Mills & Ginning Factory v. Subhash Chandra Yograj Sinha, - 1961 (4) TMI 82 - SUPREME COURT].

Any clause (say, in an agreement or statute) which begins with the words 'provided that' is called 'proviso'. The provisios are generally not used but are resorted to provide conditions on riders to the main provisions. The proviso qualifies the generality of the main section or clause by inserting an exception and take out as it was, from the main clause, a part of it which, but for the proviso would fall within the main clause. It is a foreign text to the main text of the clause or section. Its function is to carve out an exception or exclusion to the main provision which otherwise would have been in the main section. It is important that a proviso must be construed harmoniously with the main statute so as to give effect to legislative objective. It should not render itself otiose or in effective or to render substantive provision, redundant [Sales Tax Commissioner v. B.G. Patel -1995 (1) TMI 311 - SUPREME COURT ]. Supreme Court in [Balachandra Anantrao Rakvi v. Ramchandra Tukaram - 2001 (10) TMI 1103 - SUPREME COURT] held that the correct way to understand a proviso would be to read it in the context of main provision and not in isolation.

A proviso must be limited to subject matter of the main clause and should be, prima facie, read and considered in relation to the principal matter of clause to which it is a proviso. It is not a separate or independent clause and it cannot be divorced from the main clause.

A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction. [Dwarka Prasad v. Dwarka Das Saraf - 1975 (8) TMI 121 - SUPREME COURT].

The provisos are often added not as exceptions or qualifications to the main enactment but as saving clauses, in which cases they will not be construed as controlled by the section. [Shah Bhojraj Kuverji Oil Mills & Ginning Factory v. Subhash Chandra Yograj Sinha, - 1961 (4) TMI 82 - SUPREME COURT].

Ordinarily proviso is an exception to the main provision but in exceptional cases a proviso can be a substantive provision itself. [Ishveralal Thakorelal Almaula v. Motibhai Nagibhai -1965 (8) TMI 75 - SUPREME COURT,Commissioner of Commercial Taxes, Board of Revenue, Madras v. Ramkishan Shrikishan Jhaver - 1967 (8) TMI 37 - SUPREME Court].

Explanation

In Delhi Chit Fund Association v. Union of India - 2013 (4) TMI 630 - DELHI HIGH COURT , it was held that explanation explains the meaning and effect of main provision. It clears up any doubt or ambiguity in it. Ultimately, however, intention of legislature is paramount, and a mere use of legal cannot control or deflect such a function.

In Katira Constructions Ltd. v. Union of India and Others - 2013 (3) TMI 416 - GUJARAT HIGH COURT, it was held that Parliament had power to enact a law, including taxing law, with retrospective effect, when such provision create a levy for the first time, the same must be reasonable and the retrospectively must be justified on the basis of reasons for which amendment was necessary. The wisdom of Parliament in enacting a statute cannot a questioned in the court of law.

It was also held that an "explanation" was introduced by the legislature for clarifying some doubts or removing confusion which may be possible from the existing provision and to explain the meaning and effect of the main provision and to clear up any doubt or ambiguity in it. The purpose of the explanation would be to fill up the gap left in the statute, to express a mischief and making explicit which was implicit and would not normally expand the scope of main provision. An explanation is introduced by the legislature for clarifying some doubts or removing confusions which may be possible from the existing provisions.

Notification

In Cargill India Pvt. Ltd. v. Union of India 2013 (6) TMI 40 - GUJARAT HIGH COURT , it was held that for the purpose of construing an exemption notification, what was indicated in the notification should be strictly followed.

In CC, ICD, TKD, New Delhi v. Indo Shyam industries - 2011 (8) TMI 174 - CESTAT, NEW DELHI , it was held that if the definition was given in the notification, the same was required to be adhered to instead of adopting the definition from other sources.