IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an Appeal in terms of Article 128(2) of the Constitution of the Democratic Socialist Republic of Sri Lanka.

Commissioner General of Inland Revenue, Department of Inland Revenue, Sir Chittampalam A. Gardiner Mawatha, Colombo 02.

Appellant Vs SC/Appeal /145/2023 SC/SPL/LA/254/2022 Lignocell (Pvt) Ltd., CA/Tax/16/2017 No. 400, Deans Road, Tax Appeal Commission No Colombo 10.

TAC/IT/028/2015 Respondent And then Between Commissioner General of Inland Revenue, Department of Inland Revenue, Sir Chittampalam A. Gardiner Mawatha, Colombo 02.

Appellant-Petitioner Vs.

Lignocell (Pvt) Ltd, No. 400, Deans Road, Colombo 10.

Respondent-Respondent Chas. P. Hayley and Company (Private)

Limited, No. 400, Deans Road, Colombo 10.

Substituted Respondent-Respondent AND NOW BETWEEN Commissioner General of Inland Revenue, Department of Inland Revenue, Sir Chittampalam A. Gardiner Mawatha, Colombo 02.

Appellant - Appellant Vs.

Lignocell (Pvt) Ltd., No. 400, Deans Road, Colombo 10.

Respondent- Respondent Chas. P. Hayley and Company (Private)

Limited, No. 400, Deans Road, Colombo 10.

Substituted Respondent- Respondent Before: Jayantha Jayasuriya PC, CJ., Murdu N.B. Fernando, PC. J., and S. Thurairaja, PC. J.

Counsel: Nirmalan Wigneswaran, DSG, with Rajin Gooneratne, SC for the Appellant Dr. Shivaji Felix, PC with Niwantha Satharusinghe for the Substituted Respondent-Respondent Argued on: 27/03/2024 Decided on: 26/11/2024 Murdu N.B. Fernando, PC. J., This is a Tax Appeal filed by the Commissioner General of Inland Revenue challenging the Judgement of the Court of Appeal dated 10^th August, 2022.

The Court of Appeal by the aforesaid Judgement, in a ‘Case Stated’ affirmed the Determination of the Tax Appeals Commission (“the Commission”), dated 27^th April, 2017 whereby it was determined by the Commission that the Respondent-Respondent, Lignocell (Pvt) Ltd., was entitled to the tax exemptions claimed and dismissed the appeal filed by the Commissioner General of Inland Revenue. The said Respondent Lignocell (Pvt) Ltd, is now substituted by Chas. P. Hayley and Company (Private) Limited (“the Substituted Respondent”).

Initially, the Commissioner General of Inland Revenue (“CGIR/the Appellant”), in terms of Section 16 of the Inland Revenue Act No. 10 of 2006 as amended, rejected the claim for tax exemptions made by the Respondent, Lignocell (Pvt) Ltd., for the taxable periods 2009/2010 and 2010/2011.

Being aggrieved by the said decision of the CGIR (which upheld the Assessor’s findings, in appeal) the Respondent Lignocell (Pvt) Ltd., went before the Tax Appeals Commission. The Commission allowed the Respondent’s appeal.

The Appellant CGIR thereafter, invoked the jurisdiction of the Court of Appeal. The Court of Appeal too determined, that the Respondent is entitled to the tax exemptions claimed in terms of Section 16 of the Inland Revenue Act No. 10 of 2006. Being aggrieved by the Judgement of the Court of Appeal, the Appellant CGIR has come before this Court, after obtaining Special Leave to Appeal, on three Questions of Law.

The said Questions of Law are as follows:

1. Did the Court of Appeal err in law in shifting the burden of proof from the tax payer to the revenue in respect of matters that are within the specific knowledge of the taxpayer and/or relating to a tax exemption?

2. Did the Court of Appeal err in law in departing from the principle that in a case of an ambiguity or doubt regarding an exemption in a fiscal statute, such ambiguity or doubt should be resolved in favour of the revenue and not the assessee?

3. Did the Court of Appeal err in law in reading into Section 16(2)(b) the existence of a product, when the said section only refers to the same produce that is the subject of the activities set out in the said section?

The Factual Background

1. The Respondent Lignocell (Pvt) Ltd., a company engaged in the business of exporting ‘coir fibre pith’ tendered its income tax returns to the