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2017 Supreme(Raj) 1465
IN THE HIGH COURT OF RAJASTHAN AT JAIPUR
K.S JHAVERI, VIJAY KUMAR VYAS, JJ.
Commissioner of Central Excise - Appellant
Versus
M/s. Bakewell Agro Ltd - Respondent
D.B Central/Excise Appeal No. 46 of 2011
Decided On : 01-11-2017
For the Appellant : Mr. Sandeep Pathak
For the Respondent: Mr. Priyesh Kasliwal for Mr. P.K Kasliwal
An assessee is eligible for exemption from excise duty under Notification No. 108/95-CE dated 28.8.1995 even if the certificate from the United Nations or International Organization is not in its name, provided that the assessee has substantially complied with the conditions of the notification and the purpose of the notification has been fulfilled.
Headnote:
NOTIFICATION - EXEMPTION - CONDITIONS - SUBSTANTIAL COMPLIANCE - CERTIFICATE FROM UNITED NATIONS OR INTERNATIONAL ORGANIZATION - NAME OF ASSESSEE NOT MENTIONED - WHETHER ASSESSEE ELIGIBLE FOR EXEMPTION BENEFIT.
Fact of the Case:
The appellant, a manufacturer of fortified biscuits, claimed exemption from excise duty under Notification No. 108/95-CE dated 28.8.1995, which provides exemption for goods manufactured and supplied to the United Nations World Food Programme (WFP) for free distribution in Afghanistan. The appellant had entered into an agreement with M/s. Modern Food Industries (India) Ltd. (MFIL), which had been awarded a contract by the WFP for the supply of fortified biscuits. The appellant supplied the biscuits to MFIL, which in turn supplied them to the WFP. The appellant produced a photocopy of a certificate issued by the WFP in the name of MFIL, but the assessing commissioner denied the exemption on the ground that the certificate was not in the name of the appellant.
Finding of the Court:
The Tribunal held that the appellant was eligible for the exemption benefit even though the certificate was not in its name. The Tribunal found that the appellant had substantially complied with the conditions of the notification and that the purpose of the notification had been fulfilled. The Tribunal also relied on the fact that the appellant had entered into an agreement with MFIL, which had been awarded a contract by the WFP, and that all the goods produced by the appellant were supplied to the WFP.
Issues: Whether the assessee is eligible to avail exemption benefit under notification No. 108/95-CE dated 28.8.1995 when the condition of said notification for producing certificate from the United Nations or International Organization has not been fulfilled by them, in as much as they have produced a photocopy issued in the name of other firm with whom they have entered into an agreement?
Ratio Decidendi: The court held that the assessee was eligible for the exemption benefit even though the certificate was not in its name. The court found that the assessee had substantially complied with the conditions of the notification and that the purpose of the notification had been fulfilled. The court also relied on the fact that the assessee had entered into an agreement with MFIL, which had been awarded a contract by the WFP, and that all the goods produced by the assessee were supplied to the WFP.
Final Decision: The appeal was dismissed.
1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal, Central Excise dismissed the appeal of department.
2. This Court while admitting the appeal on 04.01.2012 framed following substantial question of law:
“Whether the assessee is eligible to avail exemption benefit under notification No. 108/95-CE dated 28.8.1995 when the condition of said notification for producing certificate from the United Nations or International Organization has not been fulfilled by them, in as much as they have produced a photocopy issued in the name of other firm with whom they have entered into an agreement?”
3. Counsel for appellant contended that in view of decision of the Supreme Court reported in case of CCE, New Delhi v. Hari chand Shri Gopal reported in 2010-TIOL-95-SC-CX-CB, wherein it has been observed as under:—
22. 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 settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H Dave (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e, by the plain terms of the exemption.
23. Of course, some of the provisions of an exemption notification may be directory in nature and some are of mandatory in nature. A distinction between provisions of statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. In Tata Iron and Steel Co. Ltd. (supra), this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefore the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature.
DOCTRINE OF SUBSTANTIAL COMPLIANCE AND ‘INTENDED USE’:
24. 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 expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the “essence” or the “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compl
