2018 Supreme(SC) 739

SUPREME COURT OF INDIA
Ranjan Gogoi, N.V. Ramana, R. Banumathi, Mohan M. Shantanagoudar, S. Abdul Nazeer, JJ.
Commissioner of Customs (Import), Mumbai – Appellant
Versus
M/s. Dilip Kumar And Company & Ors. – Respondents
Civil Appeal No. 3327 of 2007
Decided On : 30-07-2018

IMPORTANT POINTS
Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.
The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled.

Headnote:(a) Interpretation of statute – In case of doubt as to the meaning to be assigned to a word or a phrase or a clause used in an enactment but not specifically defined – Legitimate, rather mandatory, to fall back on General Clauses Act – However, when there is repugnancy or conflict as to the subject or context between the General Clauses Act and a statutory provision, the Court must necessarily refer to the provisions of statute. (Para 15)

       Interpretation of statute – Aids – Internal aids : long title, the preamble, the heading, the marginal note, punctuation, illustrations, definitions or dictionary clause, a proviso to a section, explanation, examples, a schedule to the Act etc. – External aids : Parliamentary debates, history leading to the legislation, other statutes which have a bearing, dictionaries, thesaurus. (Para 17)

       (b) Interpretation of statute – Legislative intent – Statutory provision open to more than one meaning – Court should choose the interpretation representing intention of the Legislature – Plain and unambiguous words should be expounded in their natural and ordinary sense – Any hardship and inconvenience, immaterial – a

       (Para 18, 19, 20)

       (2001) 7 SCC 358; AIR 1957 SC 907 – Relied upon

       (c) Interpretation of statute – Penal and taxing statutes – Strict interpretation – Provision mandating taxing certain persons/certain objects in certain circumstances – Cannot be expanded/interpreted to include those, which were not intended by the Legislature – To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory. (Para 21, 22)

       Interpretation of statute – Literal and strict interpretation – Distinction – Literal interpretation involves strict interpretation – Not vice versa especially in the area of taxation – Other tools of interpretation, namely contextual or purposive interpretation or assistance of external sources not applicable to taxation statutes – No room for equity, intendment, presumption or implication – Thus a person must be shown to be falling within ambit of the charging section by clear words used in the section – In case of ambiguous words of the provision open to two interpretations, the benefit of interpretation goes to the subject – Nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature’s failure to express itself clearly. (Para 24, 25, 26)

       (1990) 3 SCC 682; (2014) 11 SCC 672; (1986) 2 SCC 11; (1999) 3 SCC 346; (2004) 10 SCC 201 – Relied upon

       (1885) 11 Ex 452; (1869) LR 4 HL 100; (1921) 1 KB 64 – Referred

       (d) Interpretation of statute – Taxation statute – Exemption clause or notification – Held, every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly – Benefit of ambiguity therein must necessarily go in favour of subject/assessee – Not true for exemption notification – Benefit of ambiguity in exemption notification must be strictly interpreted in favour of the Revenue/State. (Para 41)

       AIR 1956 SC 202; AIR 1970 SC 755 : (1969) 2 SCR 253; (1990) 4 SCC 256; (1989) 1 SCC 345; (1992) Supp. 1 SCC 21; (2011) 1 SCC 236 – Relied upon

       (1890) 15 AC 334 (HL) – Referred

       (e) Interpretation of statute – Taxation statute – Components – Subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied – Ambiguity in understanding any component – No tax can be levied till removal of the ambiguity by legislature – In the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee – But, in case of tax exemption the benefit of doubt should go in favour of the revenue. (Para 42, 43)

       1985 Supp (SCC) 205; (1999) 8 SCC 667; (2004) 4 JT 587 : AIR 2004 SC 2615; (2011) 5 SCC 360; AIR 1970 SC 755 : (1969) 2 SCR 253; (1989) 1 SCC 345; (2011) 1 SCC 236; (1992) Supp. 1 SCC 21; 1994 Supp (3) SCC 606; (2005) 4 SCC 272 – Relied upon

       (2001) 1 SCC 578; (2005) 3 SCC 541; (2012) 6 SCC 339; (1988) Supp. SCC 796; (2008) 7 SCC 220 – Referred

       (1997) 6 SCC 564 – Overruled

       Facts of the case:

       This Constitution Bench is setup to examine the correctness of the ratio in Sun Export Corporation, Bombay v. Collector of Customs, Bombay, (1997) 6 SCC 564, namely the question is “What is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied?”

       Finding of the Court:

       Benefit of ambiguity in exemption notification must go to Revenue.

       Result: Reference answered.