Strict construction of exemption notifications gave way to a liberal reading once coverage was shown, preserving khadi exemption for recognised dealers.

An exemption notification in a fiscal statute must first be construed strictly to determine whether the claimant and the goods fall within its scope, and only then given a fair and liberal effect consistent with its object. Applying that approach to the sale of Gopuram brand bar soap, the Court treated the benefit as intended for recognised selling dealers dealing in specified village-industry products, rather than as a general commodity exemption unrelated to the dealer's status. It also noted that an identical benefit had already been finally upheld on the same facts, and a contrary view would create discriminatory treatment. The assessee was therefore entitled to the exemption for the relevant assessment year.

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Issues: Whether exemption under Notification S.R.O. No. 287/64 was available to the assessee in respect of the turnover of Gopuram brand bar soap even though the assessee was not itself a recognised institution; and whether the earlier view in the cited Division Bench decision correctly construed the notification.

Analysis: The notification granted exemption in respect of sale of ready-made khadi garments and products of village industries where such goods were manufactured and or sold by institutions or persons recognised by the Khadi and Village Industries Commission or the Kerala Khadi and Village Industries Board. The language was held to be clumsy and ambiguous, but the exemption provision had to be approached by first construing it strictly to see whether the subject fell within it and, once that threshold was crossed, by giving the provision a fair and liberal effect. Applying that approach, the Court held that the benefit was intended for a recognised selling dealer in relation to the specified village-industry products, and not as a general commodity exemption available irrespective of the identity of the dealer. The Court also took note that the earlier contrary view had attained finality in an identical matter for the same product and assessment year, and that a contrary view in the present case would result in discriminatory treatment.

Conclusion: The assessee was entitled to the exemption for the relevant assessment year, and the revision was not allowed to disturb the Tribunal's order.

Ratio Decidendi: An exemption notification in a fiscal statute must first be construed strictly to determine whether the claimant falls within its scope, and once the claimant is covered, the provision must receive a reasonable and liberal construction consistent with its object; where an identical benefit has already been finally upheld on the same facts, a contrary view should not be taken against another assessee without just cause.

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