TaxTMI 
TaxTMI 
2020 (2) TMI 370
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....erein as well as others and upheld the Clarification and Advance Ruling issued by the Commissioner under Section 48-A of the Act, by which, the said Commissioner, in a series of orders held that Hank Yarn, as stipulated in Entry 44 of Part B of the Fourth Schedule to the Act meant only cotton Hank yarn and not Hank yarn of other types of yarns like Viscose, Poly Fibre, Silk, etc. and therefore, it was taxable under Entry 3(a) of Part B of the First Schedule to the Act, 2006, which was brought in force with effect from 01.01.2007. 3. The Assessee is engaged in the manufacture of Viscose Staple Fibre (VSF) Hank Yarn and claimed exemption under Entry 44 of Part B of the Fourth Schedule to the Act on the ground that the exempted commodity Hank Yarn, Entry 44 did not specify with any prefix or suffix to restrict the exemption only to Cotton Hank Yarn and not other types of Yarn in the Hank form and therefore, they were entitled to such exemption under Entry 44 of the Fourth Schedule. 4. The term 'Hank Yarn' is known in the trade as such, because of its form of packing in the form of a round reel of the yarn, by adopting a procedure which converts yarn into commerically por....
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....d sewing thread 2003 The Fourth Schedule - Part-B - Goods exempted from tax by Section 15) Sl. No. Description of the Goods Commodity Code Number 44 Hank Yarn 744 8. Mr.V.Giri, learned Senior Counsel, who is an Ex-Judge of High Court also, with all his sense of maturity and serenity, submitted that the case in hand is actually a very simple case of plain meaning of words used in Exemption Entry 44 and their reading of Entry 3(a), which talks of all types of Yarn (other than those specified in the Fourth Schedule) read with Entry 44 in the said Fourth Schedule - Part B, namely Hank Yarn, makes it clear that Hank Yarn made of any type of yarn, whether it is Cotton Yarn or VSF (Viscose Staple Fibre), Polyester Yarn or Blended Fiber in hank form would be exempt from payment of tax and will not attract any tax under Entry 3(a) in its clear terms. 9. The learned Senior Counsel further submitted that the impugned Clarification Orders issued by the Commissioner on the supposed intention of the Legislature inferred from the Budget Speech of the Finance Minister made while introducing these Entries in the TNVAT Act that exemption to Hank Yarn was intended ....
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....ll emphasis at his command, sought to urge before us that Entry 44 was enacted by the State Legislature in 2006 and the intention of the State Legislature can be best gathered only from the Budget Speech made by the Finance Minister on the floor of the State Legislature, wherein he has clearly stated that exemption was extended to promote the Handloom Industries and by producing the data available with him, he sought to convince the Court that since the Handloom Industries majorly, approximately 85% or more, use only cotton Hank yarn, the intention of the State Legislature was to exempt only cotton hank yarn and not other types of Hank yarns like VSF hank yarn or PF Hank Yarn produced by the Assessee Company, which are mostly sold to powerloom industries for manufacturing of textile fabrics. 13. The learned Special Government Pleader submitted that the Powerloom Industry is virtually a great competitor to the Handloom industry and approximately, one powerloom industry substitutes six handloom industries by use of machines and automation, whereas the Handloom Industry is mainly a labour-oriented industry and to give them an economic support, the State considered it expedient and ....
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....well settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even 'do some violence' to it, so as to achieve the obvious intention of the legislature and produce a rational construction, Vide: Luke Inland Revenue Commissioner. The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. We think that, having regard to this well recognised rule of interpretation, a fair and reasonable construction of Section 52 sub-section (2) would be to read into it a condition that it would apply only where the consideration for the transfer is under-stated or in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in case of a bonafinde transaction where the full value of the consideration for the transfer is correctly declared by the a....
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....e sought to urge that every new Powerloom industry puts off six Handlooms in the country and the Handloom is actually a cottage industry and not an individual's field alone and from the Study Group or Expert Committee constituted in 1981, it was found that the Handloom sector only is next to agriculture sector and provides a major rural employment and the said Act of 1985 was to protect the Handloom Industry, which was sinking in spite of various concessions. Paragraph 24 of that judgment says that it is a matter of common knowledge that the bulk of the Handloom in the country produe 'bread and butter item', such as grey dhoties, sarees, towels and plain household fabrics. 19. In this context, Mr.Shafhiq, learned Special Government Pleader for the Revenue submitted that in view of this kind of plight of the Handloom sector, the Legislature of the State thought it fit to exempt from payment of tax, the basic raw material for Handloom Industries, namely the cotton Hank yarn and therefore, the mischief in the form of exemption availed by the powerloom industries deserves to be curbed by reading the word 'Cotton' in Entry 44 in the Fourth Schedule of the Act. ....
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....f the Hon'ble Supreme Court in the case of Commissioner of Customs v. Dilip Kumar & Co. [(2018) 9 SCC 1], wherein the Hon'ble Supreme Court, in paragraph 23, clearly reiterated the principles of interpretation that in applying the rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation and this is especially so in the fiscal statutes and penal statutes. However, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose. In paragraph 53 of the judgment, the Court concluded that in case of ambiguity in the charging provisions, the benefit must necessarily go in favour of the Assessee, but the same is not true for an exemption Notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. Paragraphs 23 and 53 of the said judgment are quoted below for ready reference: "23. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This i....
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....uty. The adjudicating authority, namely, the Assistant Commissioner of Customs, distinguished Sun Export case, while accepting the plea of the Department to deny the concessional rate. The Commissioner of Customs (Appeals) reversed the order of the Assistant Commissioner and came to the conclusion that Sun Export case was indeed applicable. The Department then approached the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which affirmed the order of the Commissioner of Customs (Appeals). Aggrieved thereby, an appeal was filed before a Bench of two Judges, which doubted the ruling in Sun Export case. The Division Bench was of the tentative view that the opinion expressed in Sun Export case would require reconsideration, as the proposition laid down therein was unsatisfactory, and therefore placed the matter before the Chief Justice of India for constituting an appropriate Bench. When the matter was placed before a three-Judge Bench, the Bench reiterated the view for reconsideration of Sun Export case and again placed the matter before Hon'ble the Chief Justice of India for constitution of an appropriate Bench, considering the fact that Sun Export c....
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....n and held that the Notification could not be considered in favour of the Assessee to apply the concessional rate. The said Judgment, therefore, may support the case of the Assessee rather than the case of the Revenue before us. 27. The reliance placed by the learned Special Government Pleader for the Revenue on the decision of the Hon'ble Supreme Court in the case of Bhim Singh v. Commissioner of Income Tax [(2017) 1 SCC 554], in which the Hon'ble Supreme Court dealt with a case of income tax exemption on 'Palance' of an ex-ruler, is absolutely misconceived. The Court held there as under, overruling Rajasthan High Court's Full Bench decision reported in 2014 SCC OnLine Raj. 6440: "Section 10 of the IT Act, provides that in computing the total income of a previous year of any person, any income falling within any of the clauses of Section 10 shall not be included. Clause 10(19-A) says that the annual value of any one palace which is in occupation of a Ruler and whose annual value was exempt from income tax before the commencement of the Constitution (Twenty-sixth Amendment) by virtue of the provisions of the Merged States (Taxation Concessions) Or....
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....he section for claiming exemption under the Act then provisions dealing with grant of exemption should be construed liberally because the exemptions are for the benefit of the assessee." 28. There is no such historical background to grant exemption to Cotton Hank Yarn, as contended drawing a parallel from the aforesaid decision, but the principles of interpretation applied there do have the application on the case in hand and support the interpretation in favour of Assessee. 28A. The Hon'ble Supreme Court in Collector of Central Excise v. Parle Exports (P) Ltd. [(1989) 1 SCC 345], held as under: "17. ... While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided." The aforesaid principle of construction has been clarified by a subsequent three Judges Bench of the Hon'ble Supreme Court in Novopan India Ltd. v. CCE & C [1994 Supp. (3) SCC 606], which considered Parle Exports (supra) and also Mangalore Chemicals and Fertilisers Ltd. v. CCT [1992 Supp. (1) SCC 21], held a....
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....was of exemption from payment of excise duty on the cotton fabrics. The following relevant extract from the said judgment is also quoted below for ready reference: "5. The main contention on behalf of the appellant is. that the case fell within the language of the two notifications, dated July 31, 1959 and April 30, 1960 and the appellant was entitled to, exemption from payment of excise duty on the cotton fabrics. The argument was stressed that the exemption applied to all cotton fabrics which were produced on power- looms owned by the Cooperative Society or on powerlooms. allotted to its members and it was not a relevant consideration as to who produced or manufactured such fabrics, whether it was the Society itself or its members or even outsiders. It was conceded by the appellant that it was the owner of the cotton fabrics. But even upon that assumption the claim of the appellant is that it was entitled to exemption from excise duty as it was covered by the language of the two notifications already referred to. In our opinion, the argument of the appellant is wellfounded and must be accepted as. correct. The notification, dated July 31, 1959 grants exemption to "cotton....
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....be produced on powerlooms owned by the cooperative society. There is no further requirement under the two notifications that the cotton fabrics must be produced by the Cooperative Society on the powerlooms "for itself". It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notificatlon. If the taxpayer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. Salomon & Co.(1): "Intention of the legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to enact it. In a Court of Law or Eq....
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....r in the Budget of 1966-1967, in which the Finance Minister stated that while the private companies have been normally assessed to income tax at the rate of 65%, those engaged in the industrial undertakings have been assessed at the concessional rate of 55 per cent, as a measure of rendering assistance to their growth. Such concession would unquestionably amount to relief for the purpose of development as contemplated by Section 7(e) of the Act. The Court, however, refused to treat the said difference of rate of income tax of 10% as rebate or relief granted to an industry for such development, in view of the clear terms of Section 7(e) of the Payment of Bonus Act, by observing as under: "9. We are afraid what the Finance Minister said in his speech cannot be imported into this case and used for the construction of Clause (e) of Section 7. The language of that provision is manifestly clear and unequivocal. It has to be construed as it stands, according to its plain grammatical sense without addition or deletion of any words. 10. As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the intention of the Legislatur....
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....uld be clearly provided as a rebate or relief to the particular industry instead of rate per se applied for the industry. Similarly, if the Hank yarn, without any qualification of the type of yarn sold in Hank yarn form in Entry 44, we are unable to restrict the same to cotton hank yarn. 32. In view of the aforesaid judgment, if we look at the Budget Speech of the Finance Minister in the present case, which is quoted below vide paragraph 170 of the said Budget Speech, we even do not find the word 'cotton' in the said Budget Speech of the Finance Minister, while presenting the budget of the year 2006-2007. Paragraph 170 of the Budget Speech is quoted below for ready reference: "170. Hank yarn is the chief raw material for handloom goods. Keeping in mind the need to encourage handloom industries in the State and to benefit lakhs of handloom weavers, it has been decided to exempt fully the sales tax on hank yarn. This involves a loss of revenue of about Rs. 56 crores per annum." (emphasis supplied) 33. Thus, in the light of the said Budget Speech also, there is nothing specifically mentioned to state that there was any intention to restrict the exemption of H....