TMI Blog2020 (12) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... and whether the Petitioner's claim for exemption is liable to be rejected on account of the proviso? - HELD THAT:- The scope, ambit and implications of the proviso should be gleaned from the text thereof, including any necessary implications, and not from unstated intentions. The text of the proviso prescribes that a certified copy of the relevant records of the companies from the Office of the Registrar of Companies, Madras should be produced to prove that the conditions specified in the principal clause are fulfilled. Upon consideration of this proviso, it is clear that the production of the records of the companies is required for purposes of proving that Voltas Limited held at least 90% of the issued share capital of VIL. In view of the fact that neither Voltas Limited nor VIL were incorporated by the Registrar of Companies, Madras, it is not possible to produce any records from the Registrar of Companies, Madras in order to prove the above. To put it differently, the Registrar of Companies, Madras, would not possess records relating to two companies that were incorporated in the State of Maharashtra. Whether the inability of the Petitioner to produce records from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption, and, on the contrary, is merely a method of proving that the conditions specified in the principal clause are fulfilled. The Petitioner produced the records from the office of the Registrar of Companies, Mumbai, Maharashtra, to prove the fulfillment of the condition. Both the Registrar of Companies, Mumbai, and the Registrar of Companies, Madras/Chennai are statutory authorities functioning under the Ministry of Corporate Affairs, Government of India. As a corollary, the production of records from the office of the Registrar of Companies, Mumbai to establish compliance with the condition is an acceptable near substitute and clearly qualifies as a reasonable alternative method of proving compliance with the condition. Accordingly, the impugned order dated 31.12.2009 is liable to be quashed because the said order has been passed on the basis that the Petitioner could not produce records from the Registrar of Companies, Madras as prescribed in G.O.Ms.No.1224 - the Petitioner is entitled to the benefit of G.O.Ms.No.1224 as regards the Deed of Conveyance dated 05.08.1997 - Petition allowed - decided in favor of petitioner. - Writ Petition No.8292 of 2010 And M.P.No.1 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 2000, whereas the transaction took place in the year 1997. This contention was rejected by the District Registrar, Chennai North, by proceeding dated 30.09.1997, on the ground that the registered office of the company is not within the State of Tamil Nadu. VIL filed an appeal against the aforesaid order under Section 33A(3) of the Indian Stamp Act, 1899 (the Stamp Act) before the Chief Controlling Revenue Authority but the said appeal was rejected by order dated 08.10.1999. Against the said order of the appellate authority, VIL filed W.P.No.20249 of 1999 to quash the order of the appellate authority by which the levy of stamp duty was confirmed. 4.Meanwhile, by order dated 08.08.2001 of the Hon'ble Bombay High Court, VIL was amalgamated with the Petitioner with effect from the appointed date, i.e. 01.04.2001. Thereafter, by order dated 29.06.2009, in W.P.No.20249 of 1999, this Court quashed the order of the appellate authority on the ground that G.O.Ms.No.37 was not applicable to the transaction and thereby directed the registration authorities to decide the exemption claim on the basis of G.O.Ms.No.1224. Pursuant thereto, by order dated 31.12.2009, the registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not stipulate that both the vendor and the purchaser should be companies incorporated by the Registrar of Companies, Madras. In support of the contention that the Petitioner is entitled to the benefit of the exemption, he referred to and relied upon the judgment of the Hon'ble Supreme Court in State of Orissa v. M.A.Tulloch and Co., AIR 1966 SC 365(M.A.Tulloch). The said judgment pertained to a claim for deduction under Section 5(2)(a)(ii) of the Orissa Sales Tax Act, 1948 r/w Rule 27(2) of the Orissa Sales Tax Rules. Rule 27(2) specified a method of proving that the dealer is entitled to the deduction as per Section 5(2)(a)(ii). The Hon'ble Supreme Court concluded that Rule 27(2), which prescribed a method of proving entitlement to the deduction, is directory and not mandatory. On that basis, the Hon'ble Supreme Court concluded that the production of a declaration under Rule 27(2) is not obligatory for the purpose of claiming exemption; instead, it is open to the dealer to claim exemption by adducing relevant evidence to prove such entitlement. Likewise, the learned counsel submits that the Petitioner produced the balance sheet and annual returns of VIL for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it is necessary to subject the notification to strict interpretation. In support of this contention, he referred to and relied upon the judgment of the Hon'ble Supreme Court in Grasim Industries Ltd and another v. State of Madhya Pradesh and another (1998) 8 SCC 547 (Grasim Industries), wherein the Supreme Court restated the principle of strict interpretation while interpreting exemption notifications . He also relied upon the judgments of the Supreme Court in Union of India v. Wood Papers Limited, (1990) 4 SCC 256 ( Wood Papers) , which was cited in Grasim Industries and the more recent Constitution Bench judgment in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and others (2018) 9 SCC 1 ( Dilip Kumar) , wherein the law on the interpretation of an exemption notification was restated authoritatively. On that basis, he contended that a person claiming the benefit of an exemption notification should satisfy the Court that the claim is covered by the exemption notification, and that ambiguity should be resolved in favour of the revenue. In this case, he contended that the Petitioner admittedly did not satisfy the prescription in the proviso as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany having a share capital should file with the Registrar of Companies an annual return within 60 days of its annual general meeting. Such annual return was required to contain, inter alia, particulars of shareholders and directors and any changes thereto made after the previous annual general meeting. Upon perusal of the Annual Return of VIL, which was made up to 23.09.1997, it is clear that the total issued, subscribed and paid-up share capital of VIL was 6,00,000 shares of which the Petitioner held 5,99,994 shares as on 23.09.1997. An annual return is required to disclose all share transfers that took place between the date of the previous annual return and the current one. The aforesaid Annual Return does not disclose that any share transfers were effected between 05.08.1997 (the date of Sale Deed) and 23.09.1997. Therefore, it is clear that the share holding of the Petitioner in VIL was 5,99,994 shares as on the date of execution of the Sale Deed, and this would constitute more than 99% of the issued share capital of VIL. 12. Against the aforesaid factual background, it becomes necessary to examine G.O.Ms.No.1224. The said Government Order dealt with reduction and remis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis that the unstated intention of the exemption notification was to grant exemption only to companies incorporated in Tamil Nadu? The general principle in the construction of tax statutes is that one adopts a textual interpretation without implying unstated intentions. In the context of an exemption notification, this question was examined by a Five Judge Bench of the Hon'ble Supreme Court in Hansraj Gordhandas v. CCE, AIR 1970 SC 755. The appellant therein relied on an exemption notification that applied to cotton fabrics produced on power looms owned by a cooperative society on the ground that the appellant had procured cotton fabrics from a cooperative society for its commercial use. The revenue opposed the claim on the ground that the exemption was intended to encourage cooperative mills that produced cotton fabrics for its own use and consisted of members who owned and operated power looms. This contention was rejected by the Hon'ble Supreme Court by concluding, inter alia, as under: 5. The main contention on behalf of the appellant is that the case fell within the language of two notifications, dated July 31, 1959 and April 30, 1960 and the appellant was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly produced cotton fabrics but which also consisted of members, not only owning but having actually operated not more than four power-looms during the three years immediately preceding their having joined the society. The policy was that instead of each such member operating his looms on his own, he should combine with others by forming a society which, through the cooperative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods produced on its own behalf by the society. We are unable to accept the contention put forward on behalf of the respondents as correct. On a true construction of the language of the notifications, dated July 31, 1959 and April 30, 1960 it is clear that all that is required for claiming exemption is that the cotton fabrics must be produced on power-looms owned by the cooperative society. There is no further requirement under the two notifications that the cotton fabrics must be produced by the Co-operative Society on the power looms for itself . It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise of Baroda dated November 26, 1962 and the appellate order of the Collector of Central Excise dated November 12, 1963. 14. Thus, the scope, ambit and implications of the proviso should be gleaned from the text thereof, including any necessary implications, and not from unstated intentions. The text of the proviso prescribes that a certified copy of the relevant records of the companies from the Office of the Registrar of Companies, Madras should be produced to prove that the conditions specified in the principal clause are fulfilled. Upon consideration of this proviso, it is clear that the production of the records of the companies is required for purposes of proving that Voltas Limited held at least 90% of the issued share capital of VIL. In view of the fact that neither Voltas Limited nor VIL were incorporated by the Registrar of Companies, Madras, it is not possible to produce any records from the Registrar of Companies, Madras in order to prove the above. To put it differently, the Registrar of Companies, Madras, would not possess records relating to two companies that were incorporated in the State of Maharashtra. This leads to the issue as to whether the inability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. Reference may also be made, in this regard, to the judgment of the Hon'ble Supreme Court in H.E.H. Nizam's Religious Endowment Trust, Hyderabad v. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, AIR 1966 SC 1007, and Institute of Chartered Financial Analysts of India and others v. Council of the Institute of Chartered Accountants of India and others (2007) 12 SCC 210. 16. From the above judgments, the principles that may be gleaned are that a proviso qualifies a main enactment in any of several ways. It could play a larger or smaller role by exempting, excluding, restricting, acting as an addenda, or even take on the tenor and colour of the substantial enactment. The aforesaid role may be played by imposing conditions that would restrict the scope of the enacting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Therefore, the first exercise that has to be undertaken is if the production of packing and wrapping material in the factory as it existed prior to 1964 is covered in the notification. 18. In M.A.Tulloch, which was relied upon by the learned counsel for the Petitioner, the Hon'ble Supreme Court concluded that the production of a declaration under Rule 27(2) of the Orissa Sales Tax Rules is not mandatory and that it would be sufficient if the dealer adduces other evidence to establish entitlement to the deduction. Paragraphs 24 and 25 of the said judgment are set out below: 24. It is plain from the terms of Section 5(2)(a)(ii) that a selling dealer is entitled to a deduction in respect of sales to a registered dealer of goods, if the goods are specified in the purchasing dealer's certificate of registration as being intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(2) is not always obligatory on the part of a selling dealer when claiming the exemption. It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of Section 5(2)(a)(ii) of the Act. In this case, the Sales Tax Officer was satisfied by a mere statement of the dealer and it has not been shown that in fact the registration certificate of the buying dealer, M/s S. Lal and Co., did not contain the statement that the goods were intended for resale by him in Orissa. 19. Similarly, in Commissioner of Central Excise, New Delhi vs. Hari Chand Shri Gopal and Others (2011) 1 SCC 236 (Hari Chand), the Hon'ble Supreme Court restated the principle that an exemption notification should be subjected to strict interpretation but also formulated the substantial compliance principle. Paragraphs 29 to 34 thereof are as follows: 29.The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on thereof may be given a liberal meaning if the same is directory in nature. 32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequential aspects which cannot be described as the essence or the substance of the requirements(emphasis added). Like the concept of reasonableness , the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case [CCE v. Parle Exports (P) Ltd., (1989) 1 SCC 345 : 1989 SCC (Tax) 84] deduced as follows: (Wood Papers Ltd. Case [Union of India v. Wood Papers Ltd., (1990) 4 SCC 256 : 1990 SCC (Tax) 422] , SCC p. 262, para 6) 6. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally. 60. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case [CCE v. Hari Chand Shri Gopal, (2011) 1 SCC 236] . 66. To sum up, we answer the reference holding as under: 66.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Instead, the proviso specifies a method of proving that such conditions have been satisfied. As stated earlier, the method of proof provided in the proviso is the production of the relevant records of the companies kept in the office of the Registrar of Companies, Madras. Given the fact that both Voltas Limited and VIL were incorporated in the State of Maharashtra, it is not possible to produce records from the Registrar of Companies, Madras in order to prove the entitlement of the Petitioner. Instead, the Petitioner produced certified copies of the balance sheet and annual returns from the records of the Registrar of Companies, Bombay. 23. Therefore, the question arises as to whether the Petitioner has fulfilled all conditions and requirements, wholly or substantially, to avail the exemption. As regards fulfillment of conditions, entry 38 of G.O.Ms.No.1224 prescribed three circumstances in which there would be entitlement to exemption. Upon perusal of the Annual Return of VIL, there is no doubt at all that Voltas Limited held more than 99% of the issued share capital of VIL as on the date of the Sale Deed. In effect, the Petitioner undoubtedly fulfilled the condition prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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