SELECT JUDICIAL PRONOUNCEMENTS ON STRICT INTERPRETATION IN TAXATION LAWS

‘Strict interpretation’ of statutes relating to crime means this: “Such statutes are to reach no further in meaning than their words. No person is to be made subject to them by implication, and all doubts concerning their interpretation are to preponderate in favour of the accused. Only those transactions are covered by them which are within both their spirit and their letter.

Supreme Court in COMMISSIONER OF INCOME-TAX VERSUS NC BUDHARAJA AND CO. AND ANOTHER - 1993 (9) TMI 6 - SUPREME COURT, it was held that liberal interpretation, however, cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. It would not be reasonable or permissible for the court to re-write the section or substitute words employed by the legislature in the name of giving effect to the supposed underlying subject. After all the underlying object of any provision has to be gathered on a reasonable interpretation of the employed by the legislature.

• In M/S NAHAR INDUSTRIAL ENTERPRISES LIMITED VERSUS UNION OF INDIA, PRINCIPAL COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX, ADDITIONAL COMMISSIONER (APPEALS) , CENTRAL GOODS AND SERVICES TAX, ASSISTANT COMMISSIONER, CENTRAL GOODS AND SERVICES TAX, STATE OF RAJASTHAN - 2023 (11) TMI 209 - RAJASTHAN HIGH COURT, it has been held that rule of literal construction and strict interpretation have to be applied. The court observed that while applying the rule of literal construction and strict interpretation, the statutory scheme of refund of unutilised input tax credit is applicable despite there being multiple inputs and output supplies provided it fulfills statutory precondition that accumulation of unutilised input tax credit is on account of rate of tax on inputs exceeding the rate of tax on output supplies.

Merely because present cases involve multiple inputs and multiple output supplies, the scheme of refund based on inverted duty structure cannot be held to be inapplicable. UNION OF INDIA & ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. - 2021 (9) TMI 626 - SUPREME COURT.

• In SANTHOSH MAIZE & INDUSTRIES LIMITED VERSUS THE STATE OF TAMIL NADU & ANR. - 2023 (7) TMI 191 - SUPREME COURT, it was held that law is well settled that if in any statutory rule or statutory notification two expressions are used one in general words and the other in special terms  under the rules of interpretation, it has to be understood that the special terms were not meant to be included in the general expression; alternatively, it can be said that where a statute contains both a general provision as well as a specific provision, the latter must prevail.
• In PREETI CHANDRA VERSUS DIRECTORATE OF ENFORCEMENT - 2023 (6) TMI 650 - DELHI HIGH COURT,it was held that it is a settled principle of interpretation that while interpreting a statute and/or a Section, the Courts are not to substitute or add or subtract words from the Section. The same would be amounting to supplanting the intention of the Legislature.
• In SANTHOSH MAIZE & INDUSTRIES LIMITED VERSUS THE STATE OF TAMIL NADU & ANR. - 2023 (7) TMI 191 - SUPREME COURT it was held that law is well settled that if in any statutory rule or statutory notification two expressions are used one in general words and the other in special terms  under the rules of interpretation, it has to be understood that the special terms were not meant to be included in the general expression; alternatively, it can be said that where a statute contains both a general provision as well as a specific provision, the latter must prevail.
• In JAGUAR INTERNATIONAL LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD - 2023 (3) TMI 125 - CESTAT MUMBAI, it was held that a definition in statute is intended to specify and elaborate upon expressions deployed in substantive provisions of that statute. It does not substitute for object and purposes of that Statute itself so as to afford empowerment by any administrative authority established under it.
• In COMMISSIONER OF CUSTOMS, AHMEDABAD VERSUS BARODA RAYONS CORPORATION LTD. - 2023 (1) TMI 115 - GUJARAT HIGH COURTa taxing statute is to be strictly construed. In a taxing statute, one has to look merely what is clearly said in the provision. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing has to be read in, nothing is to be implied. One can look only fairly at the end use. For this proposition, judgment of the Hon’ble Apex Court in the case of COMMISSIONER OF INCOME-TAX VERSUS KASTURI AND SONS LTD. - 1999 (3) TMI 6 - SUPREME COURT can be looked up and so also principles enunciated by the Hon’ble Apex Court in RAJASTHAN RSS. & GINNING MILLS FED. LTD. VERSUS DY. COMMISSIONER OF INCOME TAX, JAIPUR - 2014 (5) TMI 160 - SUPREME COURT

It was further held that taxing statute is to be strictly construed legislature has greater latitude in formulating its tax policy either directly or by delegated legislation. Transaction cannot be taxed on doctrine of ‘sub-stance of matter’ as distinguished from its legal signification. Subject is not liable to tax on supposed ‘spirit of law’ or ‘by inference or by analogy’. Courts cannot give words strained and unnatural meaning to cover loopholes through which an enasive taxpayer may escape or to tax transactions which, had legislature thought of them, would have been covered by appropriate words.

• In GODFREY PHILLIPS INDIA LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-I - 2021 (10) TMI 933 - CESTAT MUMBAI,it was held that a deeming provision has to be construed strictly. It is a settled principle of law that deeming provisions in the statute should be strictly construed as per the plain language used therein and the same cannot be interpreted differently to defeat the legislative intent.
• In ARCTIC COOLING SOLUTIONS INDIA PVT. LTD. VERSUS UNION OF INDIA, THE PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, THE DESIGNATED COMMITTEE-II, SABKA VISWAS (LEGACY DISPUTES RESOLUTION) SCHEME (SVLDRS) , THE JOINT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE - 2021 (6) TMI 632 - KERALA HIGH COURT, it was held that beneficial provisions ought to be interpreted strictly in favour of Department and against assessee, unlike taxing provisions where interpretation favours assessee.
• In M. SRINIVASAN, R. SUBBURAJ, ASHOK ANNAL, R. VISHNU VERSUS UNION OF INDIA, RAILWAY BOARD, FINANCIAL ADVISER & CHIEF ACCOUNTS OFFICER, THE SENIOR DIVISIONAL COMMERCIAL MANAGER AND OTHERS - 2021 (5) TMI 39 - MADRAS HIGH COURT,it was held that courts areexpected to adopt strict interpretation of law so far as liability regarding tax regime to concerned and tax to be recovered from assessees by following procedures contemplated. The court was of the considered opinion that where the liability regarding tax regime is concerned, the Courts are expected to adopt strict interpretation of law. Liberal interpretation is impermissible, which can be adopted only in respect of certain welfare legislations and as far as the tax laws are concerned, it is to be borne in mind that strict interpretation of provisions are to be adopted, so as to recover taxes from the assessees by following the procedures contemplated.
• In M/S. VIKAS WSP LTD. & ORS. VERSUS DIRECTORATE ENFORCEMENT & ANR. - 2020 (11) TMI 629 - DELHI HIGH COURT it was held thatwhere statutory authority required to do something in particular manner, it must be done in that manner or not at all. State/Authorities are creature of statute and must act within its four corners.
• In M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS - 2021 (3) TMI 384 - SUPREME COURT, it was held that where the statute confers the same power to perform an act on different officers, as in this case, the two officers, especially when they belong to different departments, cannot exercise their powers in the same case. Where one officer has exercised his powers of assessment, the power to order reassessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank. In our view, this would result into an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute.

It was further observed and held that it is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that ‘the proper officer’ can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. We find it completely impermissible to allow an officer, who has not passed the original order of assessment, to re-open the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment. The nature of the power conferred by Section 28(4) of Customs Act to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake reassessment [which is involved in Section 28(4)].

• In TAMIL NADU CASHEW PROCESSORS & EXPORTERS ASSOCIATED REPRESENTED BY ITS SECRETARY VERSUS UNION OF INDIA, THE DIRECTORATE GENERAL OF FOREIGN TRADE, THE DEPUTY DIRECTOR GENERAL OF FOREIGN TRADE - 2021 (1) TMI 524 - MADRAS HIGH COURT, it was held that where there is a statutory requirement to do something in a particular way, it is deemed to be prohibited to be done in any other way.
• In COMMERCIAL TAXES OFFICER VERSUS M/S. BOMBAY MACHINERY STORE - 2020 (4) TMI 769 - SUPREME COURT, it was observed that tax Administration cannot interpret legislative provisions based on their own perception of trade practice. They cannot supply words to legislative provisions to cure omissions of legislature. If they felt assessee/dealer was taking unintended benefit of legislative provisions, proper course would be legislative amendment.
• In M/S. AMAZONITE STEEL PVT. LTD. & ANR., M/S. CORANDUM IMPEX PVT. LTD. & ANR., M/S. CUPRITE MARKETING PVT. LTD. & ANR. VERSUS UNION OF INDIA & ORS. - 2020 (3) TMI 1179 - CALCUTTA HIGH COURT, on strict and literal construction, it was held that Section 83 of Central Goods and Services Tax Act, 2017 shall be construed literally and strictly.

Section 83 of the CGST Act, 2017 has to be construed literally and strictly. On a perusal of Section 83 of the CGST Act, 2017, it is evident that Section 83 does not provide for an extension of an order for provisional attachment and any such extension shall be de hors the statute. Section 83 of the CGST Act, 2017 empowers the competent authority to issue an order for provisional attachment of property including bank accounts if it is of the opinion that such a step is necessary for protecting the interest of government revenue. It is palpably clear that Section 83(2) of the CGST Act, 2017 permits continuation of a provisional attachment order for a period of one year from the date of order after which it ceases to remain in effect. However, there is nothing in the section which indicates that upon completion of the prescribed period, a fresh order cannot be issued. To say this would amount to supplying such requirements into the section which would go against the well-established principles of interpretation of statutes. In the view point of the Court, after the expiry of the time period, the appropriate authority may be of the opinion that such an attachment is further required to protect the interest of government revenue, and may therefore, issue a fresh order upon compliance of the formalities in Section 83(1) of the CGST Act, 2017.

• In PURNIMA ADVERTISING AGENCY PVT. LTD. AND 1 VERSUS UNION OF INDIA THROUGH SECRETARY AND 2 - 2016 (4) TMI 291 - GUJARAT HIGH COURT​​​​​​​, it was held that if refund is wrongly sanctioned on 02.06.2008 by credit to Consumer Welfare fund but, subsequently, it is paid to assessee on 10-3-2010, then, interest on belated refunds is payable up to 'date of actual payment' to assessee, viz., 10.03.2010 and interest would not stop on 'date of sanction', viz.,02.06.2008.
• In M/S. D.P. JAIN AND COMPANY INFRASTRUCTURE PVT. LTD. VERSUS UNION OF INDIA, THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX - 2016 (7) TMI 784 - BOMBAY HIGH COURT, it was held that in matters of taxing provisions, legislature enjoys very wide latitude and discretion. Court cannot sit in judgment over wisdom of Legislature. It is not for court to probe this part of Legislative action even if it finds that some other way or measure could have been thought of. Further, when language of section or provision is clear and unambiguous, court must give effect to it. Court cannot interpret provision and by finding out supposed intention of Legislature. Only when language is not clear but ambiguous or obscure, then, there is scope for interpretation. Further to ensure that benefits of welfare and beneficial legislation are derived by those for whom it is enacted, broad categorization is permissible.
• In MERCEDES BENZ INDIA PRIVATE LIMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE 1 - 2016 (4) TMI 933 - BOMBAY HIGH COURT, where Service Tax was paid on common input services used both in relation to manufacture of goods and trading activities in respect of imported goods, it was held that on introduction of Clause (c) of Explanation 1 to Rule 6Cenvat Credit Rules, 2004 w.e.f April 1, 2011, and even prior thereto, it cannot be said that Parliament intended to encourage trading of goods rather than manufacturing of same. The intent of Parliament has to be gathered from language used. If words are plain, simple and clear, there is no scope for interpretation or applying any principle thereof.
• In VODAFONE INDIA SERVICES PVT. LTD. VERSUS UNION OF INDIA, ADDL. COMMISSIONER OF INCOME TAX, DY. COMMMISSIONER OF INCOME TAX - 2014 (10) TMI 278 - BOMBAY HIGH COURT, it was held that strict interpretation should be done of taxing statutes. Provisions have to be read as a whole. Rejecting words to achieve determined objective is not permissible. While interpreting a fiscal or taxing statute, the intent or purpose is irrelevant and the words of the taxing statute have to be interpreted strictly. In the case of taxing statutes, in the absence of the provision by itself being susceptible to two or more meanings, it is not permissible to forgo the strict rules of interpretation while construing it.
• In M/S TATA SKY LTD. VERSUS STATE OF MP AND OTHERS - 2013 (4) TMI 373 - SUPREME COURT, it was held that notification cannot enlarge the charging section. If no tax can be levied on an activity under the charging section, no tax can be levied on such activity even after issuance of notification prescribing rate of tax thereon. It is well settled that if collection machinery provided under Act is such that it cannot be applied to an event, it would follow that event is beyond charge created by taxing statute. Valuation provision provides only a measure of tax and it does not create charge. The question of going to measure of tax would arise only if it is found that charge of tax is attracted.
• In COMMISSIONER OF INCOME TAX-IV VERSUS SIKANDAR KHAN N TUNVAR - 2013 (5) TMI 457 - GUJARAT HIGH COURT, it was held that the taxing statutes must be construed strictly. By any intendment or liberal construction of provisions, the liability cannot be fastened if the plain meaning of the section does not so permit. It was held that the words 'paid' and 'payable' are not synonymous.
• In M/S BHARTI AIRTEL LTD & OTHERS VERSUS STATE OF KARNATAKA FINANCE DEPARTMENT & OTHERS - 2011 (2) TMI 307 - KARNATAKA HIGH COURT, it was held that the ratio of the rule of interpretation that words of legal import occurring in a statute should be construed in their legal sense is that those words have, in law, acquired a definite and precise sense, legal sense, and that, accordingly, the legislature must be taken to have intended that they should be understood in that sense. Therefore, while interpreting an expression used in a legal sense, we have only to ascertain the precise connotation which it possess in law.
• In VIVEK JAIN VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX - 2011 (1) TMI 897 - ANDHRA PRADESH HIGH COURT, it was held that the provisions of a tax statute must be strictly construed. The word of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning. GURUDEVDATTA VKSSS MARYADIT & OTHERS VERSUS STATE OF MAHARASHTRA & OTHERS - 2001 (3) TMI 976 - SUPREME COURT. The Legislature may be safely presumed to have intended what the words plainly say. (BHAIJI VERSUS SUB DIVISIONAL OFFICER THANDLA & ORS. - 2002 (12) TMI 599 - SUPREME COURT).The intention of the legislation must be found in the words used by the Legislature itself. The question is not what may be supposed and has been intended but what has been said. UNIQUE BUTYLE TUBE INDUSTRIES (P.) LTD. VERSUS UP. FINANCIAL CORPN. - 2002 (12) TMI 508 - SUPREME COURT. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed. It cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency.
• In BANSAL WIRE INDUSTRIES LTD. VERSUS STATE OF UP. - 2011 (4) TMI 77 - SUPREME COURT, it was held that words used in section, rule or notification cannot be rendered redundant and should be given effect to. It observed as follows:—

'It is a settled principle of law that the words used in the section, rule or notification should not be rendered redundant and should be given effect to. It is also one of the cardinal principles of interpretation of any statue that some meaning must be given to the words used in the section.

In arriving at the aforesaid conclusion, we find support from the decision of this Court in UNION OF INDIA VERSUS HANSOLI DEVI AND OTHERS - 2002 (9) TMI 799 - SUPREME COURT wherein this Court held that it is a cardinal principle of construction of a statute that when the language of the statute is plain and unambiguous, the court must give effect to the words used in the statute.

Besides, in a taxing Act one has to look merely at what is clearly said and there is no room for any intendment. In a taxing statute nothing is to be read in, nothing is to be implied, one can only look fairly at the language used.'

• In COMMISSIONER OF INCOME-TAX VERSUS NARINDER MOHAN FOUNDATION - 2007 (10) TMI 288 - DELHI HIGH COURT, it was held that taxation statutes admit of a strict interpretation.
• In COMMISSIONER OF INCOME TAX, KERALA VERSUS TARA AGENCIES - 2007 (7) TMI 4 - SUPREME COURT, it was held that the legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately not incorporated.
• InCRAFT INTERIORS PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE - 2006 (10) TMI 2 - SUPREME COURT ,it was held that while interpreting any statute, common parlance meaning or popular meaning shall prevail over dictionary meaning to interpret the words. As stated by K. L. Sarkar in his book 'Mimansa Rules of Interpretation' (see second edition published by Modern Law Publication, Allahabad). 'The popular meaning overpowers the etymological meaning'. To give an example, the word 'pankaja' literally means born in mud. The word 'panka' means 'mud', and the word 'ja' means 'which is born in mud'. Many things can be born in mud e.g. insects, vegetation, water flowers, etc. However, by popular usage the word 'pankaja' has acquired a particular meaning in common parlance i.e., lotus. This meaning will, therefore, prevail over the etymological meanings.
• In AMRIT PAPER VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA - 2006 (7) TMI 7 - SUPREME COURT, it was held that while interpreting the statute, primacy to notifications over rules need not be given. Such interpretation will render statutory provisions in rules nugatory and redundant.
• In THE MARTAND DAIRY AND FARM VERSUS THE UNION OF INDIA AND OTHERS - 1975 (4) TMI 100 - SUPREME COURT, it was held that Taxation considerations stem from administrative experience and other factors of life and not from artistic visualisation or neat logic and so the literal, though pedestrian interpretation must prevail.
• In HIS HIGHNESS YESHWANT RAO GHORPADE VERSUS COMMISSIONER OF WEALTH-TAX, BANGALORE - 1966 (5) TMI 14 - SUPREME COURT, it was held that Courts are not entitled to fill any lacuna in any Act, much less in a Taxing Act, but the Courts will also not stretch a point in favour of the taxpayer to enable him to get by his astuteness the benefit which other taxpayers do not obtain.
• In COMMISSIONER OF INCOME-TAX, MADRAS VERSUS V. MR. P. FIRM, MAUR. - 1964 (10) TMI 13 - SUPREME COURT, it was held that Supreme Court of India has held that equity is out of place in tax laws.
• In COMMISSIONER OF SALES TAX, UP. VERSUS MODI SUGAR MILLS LTD. - 1960 (10) TMI 65 - SUPREME COURT , it was held that considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity (Ref: STATE BANK OF TRAVANCORE VERSUS COMMISSIONER OF INCOME-TAX, KERALA - 1986 (1) TMI 1 - SUPREME COURT.) It has also been said that if taxing provision is 'so wanting in clarity that no meaning is reasonably clear, the court will be unable to regard it as of any effect.' [Ref: IRC v Ross & Coulter (1948) 1 All ER 616 (HL);referred to in GURSAHAI SAIGAL VERSUS COMMISSIONER OF INCOME-TAX - 1962 (8) TMI 66 - SUPREME COURT. It has also been held that in interpreting taxing statute, equitable considerations are entirely out of place nor can E taxing statutes be interpreted on any presumptions or assumptions. It must interpret a taxing statute in the light of that is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency. [Also see: COMMISSIONER OF INCOME-TAX, BOMBAY CITY I VERSUS MAHARASHTRA SUGAR MILLS LIMITED - 1971 (8) TMI 14 - SUPREME COURT.
• In Cape Brady Syndicate v IRC (1921) 1 KB 64 (1968) AIR 623 (Supreme Court), it was held that consideration of equity are wholly out of place in a taxing statute and only principle of strict interpretation applies to taxing statutes. In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.