TMI Blog1994 (10) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... I to Government Order No. CI/ 138/SPC/90 dated September 27, 1990), the extent of exemption being 100 per cent tax exemption without any monetary limit and the period of exemption being three years from the date of commencement of commercial production. 3. The petitioner's new unit is situated in zone II falling under item No. (1) of the table given in the said notification dated June 19, 1991 and therefore eligible for 100 per cent tax exemption as provided in the notification, without monetary limit for a period of three years from the date of the petitioner going into commercial production. The Department of Industries and Commerce issued a certificate dated September 26, 1994 confirming that the petitioner is entitled to such exemption regarding Central sales tax and Karnataka sales tax. 4.. In connection with the provisional assessment under section 12-B(2) of the Act, the assessing authority (second respondent) issued the following endorsement dated October 18, 1994 to the petitioner: "As per the Notification No. FD 239 CSL 90(I), dated 19th June, 1991 under section 8-A of the KST Act, 1957, the assessee-firm, Sri Neelakanteshwar Oil Industries, Gangavati, is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise for consideration: (a) Whether a provision for exemption can be construed as extending to a matter, which is not expressly provided. On the principles relating to construction of exemption clauses, whether the notification dated June 19, 1991, can be construed as exempting payment of purchase tax on raw materials purchased by new industrial units. (b) Whether having regard to the decision in Anitha Cashew Industries [1993] 90 STC 163 (Kar), the notification dated June 19, 1991, should be construed as exempting payment of purchase tax on raw materials. Re. Point (a): 8.. Let me first examine the principles relating to interpretation of exemption clauses in taxation statutes. 8.1. I may start with the following oft-quoted passage in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64, relating to construction of taxing statute, which apply with equal force to provisions relating to exemptions: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on different touchstone. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction." 8.3. In Collector of Central Excise, Bombay v. Parle Exports (P.) Ltd. [1989] 75 STC 105; AIR 1989 SC 644, the Supreme Court held: "The expressions in the Schedule and in the notification for exemption should be understood by the language e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. v. Collector of Central Excise [1991] 82 STC 225; AIR 1990 SC 27. 8.5. In Mangalore Chemicals Fertilizers Limited v. Deputy Commissioner of Commercial Taxes [1991] 83 STC 234; AIR 1992 SC 152, the Supreme Court held as follows: "The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the Legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation." It is also held that once the initial hurdle regarding applicability of exemption is crossed, the condition prescribed may be liberally construed. This will be evident from the following passage from the same decision: "The consequence of loss of exemption from tax flowing from the noncompliance of condition prescribed for eligibility for exemption would be the result if a condition was a substantive one and one fundamental to the policy underlying the exemption. Its stringency and mandatory nature must be justified by the purpose int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to. (v) It is always for the person claiming the benefit of exemption to clearly establish that he is entitled to the exemption and this burden cannot be shifted on the Revenue. 10.. Having set out the principles, let me examine the notification dated June 19, 1991, in the light of the said principles. The description of the subjectmatter of the exemption is "tax payable in respect of goods manufactured and sold by new industrial units". These words are clear, specific and unambiguous. In such a case having recourse to interpretative tools will not arise. Consequently the question of considering or applying an interpretation beneficial or favourable to the assessee also does not arise. Only where two interpretations are possible, the question of adopting an interpretation favourable to the assessee would arise. Where the words are clear, the plain and straight meaning should be given to them and there is no question of adopting an interpretation favourable to the assessee. What is not stated cannot be included in a provision relating to exemption. The guideline recommended by the Supreme Court in Wood Papers case [1991] 83 STC 251; AIR 1991 SC 2049 is "Do not extend or wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated so. It should be noted that the Government has issued several notifications exempting payment of tax on the raw materials purchased, in given cases. 12.. The learned counsel for the petitioner contended that if the petitioner is made to pay purchase tax on groundnuts purchased by it for being used in the manufacture of oil, then the exemption given would become illusory; that whatever benefit that was given by exempting sales tax on oil manufactured and sold is taken away by requiring the petitioner to pay purchase tax on the groundnuts and the petitioner will be in no better position than the other manufacturers who do not enjoy the benefits of exemption under the notification dated June 19, 1991. The argument is not sound. By virtue of the exemption under the notification dated June 19, 1991, the petitioner will be able to sell the groundnut oil to its customers without incurring liability to pay any sales tax for a period of three years; whereas persons who do not have the benefit of the exemption under the said notification, will have to sell the groundnut oil manufactured by them and pay sales tax on the turnover. Thus there is a price advantage to the petitioner to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at naught. In that background, this Court examined the object and purpose of the said Government notification and held that the petitioner therein was entitled to exemption from payment of purchase tax in respect of the raw cashew purchased. 14.. Anitha Cashew [1993] 90 STC 163 (Kar) is thus based on different facts and is based on a principle which is an exception to the rules of construction. In Anitha Cashew case [1993] 90 STC 163 (Kar), the "goods manufactured and sold" by the assessee was not subject to tax at all. Hence grant of exemption from tax under the notification dated March 31, 1983, became "illusory". In other words, though the notification dated March 31, 1983, purported to extend a benefit by way of exemption to new units, no such benefit was really extended as there was no need for the exemption at all, in the case of manufacturers of cashew kernels. The notification dated March 31, 1983 if literally applied, did not give any benefit to new units manufacturing cashew kernels at all. The result was in spite of the notification granting exemption, such new units were in the same position as other units. The only way a lending hand could be given to the new units m ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
