TMI Blog2010 (7) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... of petroleum products. The petroleum products dealt by the assessee-company in the State of Karnataka is either received by way of stock transfer from branches outside the State of Karnataka or by way of purchases effected in the course of inter-State trade or from the registered dealers inside the State. The assessee filed annual returns for the year ending March 31, 2002. It also filed revised returns. In response to a call notice issued calling upon the assessee to produce all its books of account and documents for verification, they were produced. On verification of the said books of account, it was noticed that the assessee had claimed exemption on a turnover of high speed diesel (HSD) of Rs. 26,34,19,619 in terms of Notification No. FD 65 CSL 2001, dated April 4, 2001/July 10, 2001 issued under section 8A of the KST Act 1957 with regard to sale of high speed diesel (HSD) to fishermen. According to the said notification, the assessee was eligible for benefit of tax exemption in terms of the above notification. However, the benefit was restricted to the tax payable under section 5 only and not section 6D of the Act. In terms of the aforesaid notification, according to the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that, the notification issued clearly sets out the exemption, which should be strictly construed. The courts by way of process of an interpretation cannot add words, which are not used by the Government in extending the benefit of exemption. In support of his contention, he also relied on judgment of the apex court as well as the Division Bench of this court, wherein it has been held, that the notification granting exemptions cannot be interpreted in a broad sense, on the contrary, it has to be given effect to by a strict interpretation and therefore, he submits that the order passed by the authorities below is strictly in accordance with law and does not call for any interference in this revision. Therefore, the short question that arises for our consideration is: Whether the Notification No. F.D. 65 CSL 2001 dated July 10, 2001, exempt the payment of cess under section 6D of the Act? Section 8A of the Act empowers the State Government to notify exemptions and reductions of tax. In pursuance of the power conferred on the State, Notification No. FD 65 CSL 2001, Bangalore, dated July 10, 2001 was issued which was duly published in the Karnataka Gazette, Extraordinary No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, to enable them to eke out a decent livelihood. Section 5 of the Act is the charging section which levies tax on sale or purchase of goods. Section 6D provides for levy of cess, which reads as under: 6D. Levy of cess. (1) In addition to the tax payable under sections 5, 5B, 5C and 6, there shall be levied and collected by way of cess (for a period of four years) with effect from the first day of April, 1998 for the purpose of equity investment in (Infrastructure Devel opment Corporation (Karnataka) Limited and Bangalore Mas Rapid Transit Limited in the proposition of 67.33 respectively) a tax, on sale or purchase effected (. . .) by any dealer, at the rate of five per cent of tax payable under the said sections: Provided that where a dealer is selling to any person goods spec ified in serial number 12 of Part M of the Second Schedule (. . .), such dealer shall pay the case on the sale of, (i) petrol at the rate of twenty-five paise per litre; and (ii) diesel at the rate of ten paise per litre. (2) Nothing contained in the section shall apply to the goods specified in the Fourth Schedule. (3) The provision of this Act and the Rules made thereunder including th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry object and the essential purpose must be distinguished from its ultimate or incidental result or conse quences. That is the true test in determining the character of the levy. If the specific services is indistinguishable from public service, and in essence is directly a part of it, it would partake the character of tax. Then the word cess means a tax, an additional tax. It is levied in addition to an existing tax. It is levied as an increment to an existing tax. Without there being a basic tax, levy of cess would not arise. Normally cess is levied for some special administrative expense which the name indicates, may be for a temporary duration. A reading of the notification makes it clear the Legislature wanted to levy cess for a period of four years from April 1, 1998 for the purpose of equity investment in Infrastructure Development Corporation (Karnataka) Limited and Bangalore Mass Rapid Transit Limited. Most of the fishermen who are granted the benefit under the notification are residing in coastal areas adjoining Arabian Sea. Specifically they are not the beneficiaries of Bangalore Mas Rapid Transit System to be improved by the State. Even Infrastructure Development C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the Division Bench set aside the same and made the aforesaid observations. When we read section 6D, it makes clear that the cess payable under the provisions would be in addition to the tax payable under sections 5, 5B, 5C and 6. In other words, cess is payable only if the tax is payable under sections 5, 5B, 5C and 6. If no tax is payable under these charging sections, then the liability to pay levy of cess is not there under the Act. It is settled law that when words are expressly used in a particular provision of law while interpreting those provisions, courts must give effect to each and every word used in the said provision. When the Government in order to mitigate the financial distress on the part of the poor fishermen thought it fit to exempt them from payment of tax under section 5 of the Act, which is the basic tax payable for purchase of petrol or diesel, as the cess was payable in addition to the said tax, which was in the nature of an increment on the tax, the said levy of cess also stands exempted. Any other interpretation to the said provision would not only cause inconvenience to the poor fishermen but would run counter to the State Government's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question which arose for consideration in the said case was as to whether the blended yarn in which polypropylene predom inates and falling under tariff item 18E was not entitled for the benefit under the notification. In that context, the apex court held that it is for the assessee to establish that the goods manufactured by him come within the ambit of a Central excise exemption notification. Since it is a case of exemption from duty, there is no question of liberal construction to extend the term and the scope of the exemption notification. Such exemption notification must be strictly construed and the assessee should bring himself squarely within the ambit of the notification. No extended meaning can be given to the exempted item to enlarge the scope of exemption granted by the notification. There cannot be any quarrel with the aforesaid legal proposition. Exemption notification has to be construed strictly. It cannot be construed liberally so as to include items in respect of which exemption was granted by the Government. However, if exemption is granted under a notification from payment of tax and if cess payable is dependent on payment of tax and when the basic liabil ..... 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