TaxTMI 
TaxTMI 
2016 (9) TMI 636
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.... sum of Rs. 28,12,788/- under Notification No.41/2007-ST, dated 6-10-2007, for the exports made during the period from January, 2008 to March, 2008, in relation to the service tax paid on the transport of goods by road (GTA) services. 4. The original Notification No.41/2007, dated 6-10-2007, did not attach any conditions for the grant of the benefit of exemption under Section 65 (105) (zzp) in relation to the services provided for transport of certain goods from the inland container depot to the Port of Export. But by an amendment to the said notification, under Notification No.3/2008-ST, dated 19-2-2008, 4 conditions were imposed in relation to the same services, for the grant of the benefit of exemption. One of the conditions so imposed was that the details of exporters invoice relating to the export goods should be specifically mentioned in the lorry receipt and the corresponding shipping bill. 5. Since the respondent/Assessee did not fulfil the aforesaid condition, the refund claim made by the respondent was rejected by the Deputy Commissioner of Service Tax by an order in original dated 2.2.2010. 6. The respondent/Assessee filed 3 appeals as against the rejection of 3....
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....te of India, Extraordinary, vide number G.S.R. 601 (E), dated the 17th September, 2007, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in column (3) of the Schedule (hereinafter referred to as specified services) received by an exporter and used for export of goods (hereinafter referred to as said goods), from the whole of the service tax leviable thereon under Section 66 and Section 66A of the said Finance Act, subject to the conditions specified in the corresponding entry in column (4) of the Schedule: Provided that (a).. (b) . (c) . (d) . (e) (f) . 2. The exemption contained in this notification shall be given effect to in the following manner, namely:- (a) (b) (c) (d) (e) .. (f) the refund claim shall be accompanied by documents evidencing, - (i) export of the said goods: (ii) payment of service tax on the specified services for which claim for refund of service tax paid is filed; (iii) wherever applicable, a copy of the written agreement entered into by t....
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.... dated 6-10- 2007 extracted above : 1) that as per Para 1 thereof, exemption is granted to the taxable services specified in Column 3 of the Table below the Schedule, subject to the conditions specified in the corresponding entry in column 4 of the Table under the Schedule; 2) that as per Paragraph 2 (f) of the exemption notification, which prescribes the procedure, the refund claim should be accompanied by the documents listed therein; and 3) that out of 7 taxable services which were exempt thereunder, 4 taxable services, listed in S.Nos.2, 5, 6 and 7, were exempt without any conditions attached thereto and the other 3 services made subject to the fulfilment of the conditions stipulated in column 4. In other words, the grant of exemption for 3 types of services, listed at S.Nos.1, 3 and 4 in the Table below the Schedule to the Notification, was made subject to the conditions stipulated in column 4 of the Table under the Schedule. But column 4 of the Table was left blank in respect of 4 types of taxable services listed in S.Nos.2 and 5 to 7. 13. Therefore, it is clear that as per the original notification of the year 2007, the services provided for the transport of good....
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.... should also make a declaration in the refund claim, indicating whether such service has been received from the service provider for purposes other than for export. 16. A careful look at all the four conditions would show that at least 3 out of those 4, are evidentiary in nature. While the 2nd condition relates to what should be found in the invoice, the 3rd condition relates to what should be found in the lorry receipt and the 4th condition relates to a declaration to be made by the exporter in the refund claim. 17. The grievance as well as the contention of the respondent/ Assessee is that in so far as the export of iron ore is concerned, the practice prevalent in the industry is to aggregate significant quantity of the materials at the port of export and to prepare the exporters invoice thereafter. This practice, according to the respondent, is attributed to the demand-supply factor inherent in the trade, where huge consignments are exported on short notice. The respondent claims that they have exported up to 40,000 tonnes of iron ore and the proportional usage of transport services is to the tune of 3,000 trucks, used to transport the goods from the place of removal to th....
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....d the above submissions. Since the substantial questions of law raised herein, revolve around the rules of interpretation to be applied to an exemption notification, we think it would be better first to take a survey of the law relating to the rules of construction of exemption notifications. RULES OF CONSTRUCTION OF EXEMPTION NOTIFICATIONS 22. The rules of interpretation to be applied to exemption notifications are slightly different from the rules of interpretation applicable to the charging provisions. Way back in 1956, a Constitution Bench of the Supreme Court held (by a majority) in Union of India vs. Commercial Tax Officer {AIR 1956 SC 202} that "exemption is a creation of statute and must be construed strictly". Interestingly, that case before the Constitution Bench concerned an exemption under Section 5 of the Bengal Finance (Sales Tax) Act, 1941. Section 5(2)(a)(iii) of the Act exempted the sales to the Indian Stores Department and the Supply Department of the Government of India and any Railway Company from being included in the taxable turnover. The assessee claimed exemption in respect of the sales made to the Ministry of Industry and Supplies, Government of India....
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....ed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction". 25. Holding that the above view represents the correct position of law, a three member Bench of the Apex Court, in Novopan India Ltd vs. Collector of Central Excise and Customs {1994 Supp. (3) SCC 606}, also referred to the opinion of Lord Halsbury, L.C., in IRC vs. James Forrest to the effect that all exemptions from taxation, to some extent increase the burden on other members of the Community. The Bench also referred to the observations of Cohen, L.J., in Littman vs. Barron to the effect that "the principle that in case of ambiguity, a taxing statute should be construed in favour of a tax payer does not apply to a provision giving a tax payer relief in certain cases from ....
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....gra: whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor 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 liberally. An eligibility criteria therefore deserves a strict construction, although construction of a condition thereof may be given a liberal meaning." 29. In Southern Petrochemical Industries Co. Ltd vs. Electricity Inspector {2007 (5) SCC 447}, the court held that "the principle of construction of a statute that the exemption provisions would be attracted only when requisite conditions therefor are satisfied, would also apply in a case of constitutional interpretation". Application of Principles of law to the facts on hand 30. Having traced the nuances of the law relating to the construction of exemption notifications, let us now see the application of those principles to the facts of the cases on hand. 31. The main contention of the respondent/Assessee is that condition No.3 in the amended exemption notification is a mere matter of procedure and that therefore some amount of laxity can be given with ....
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....ication. Hence, the first question of law is to be answered in favour of the appellant/Revenue and against the respondent/Assessee. Question No.2 36. The second question of law that arises for consideration is as to whether the theory of substantial compliance can be applied to the conditions stipulated in exemption notifications. 37. The answer to the above question is to be found very clearly in the decision of the Constitution Bench of the Supreme Court in Commissioner of Central Excise v. Hari Chand Shri Gopal (2011) 1 SCC 236. If we look at the facts of the case decided by the Constitution Bench, it is seen that the Assessees in the case before the Supreme Court were engaged in the manufacture of excisable goods, which became chargeable to the duty of excise with effect from 01.03.1994. The Assessee was transferring a major portion of the manufactured goods to certain companies, under the cover of transfer challans, describing them in a particular manner. The factory of the Assessee was raided by the Preventive Wing of the Excise Department and on the basis of what was found out, notices were issued. The Assessee claimed the benefit of exemption under a notification. ....
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....that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. 41. To understand the scope of the ratio of the decision of the Larger Bench in Commissioner of Central Excise v. Hari Chand Shri Gopal case, it is necessary to look at the nature of the contention raised before the Supreme Court in that case. As seen from para-17 of the report, the contention of the Assessee before the Supreme Court was that the conditions stipulated in Chapter-X are only procedural in nature, warranting liberal construction and that if there was substantial compliance and if the intended use of the goods had been established, then the benefit of exemption notification cannot be denied. 42. While dealing with the said contention, the Supreme Court opined in para-29 as follows: 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 p....
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....pose. 45. The Supreme Court went on to point out that substantial compliance is insisted where mandatory or directory requirements are lumped together and that in cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. In para-34, the Supreme Court held as follows: The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential. 45. Therefore, what can be condoned, is that which is not the essence of the thing to be done, but th....