TaxTMI 
TaxTMI 
2021 (8) TMI 391
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.... claiming the benefit of exemption notification 153/93-Cus dated 13-8-1993 as amended 1/2017-Cus dated 20-1-2017. This notification exempted telematic infrastructural equipment when imported into India for being used for the export of software out of India under STP hundred percent export oriented scheme subject to several conditions, of which the condition in question is condition (ii) which read as follows in the original notification no 153/93-Cus dated 13-8-1993: "(ii) The importer uses the said goods only for the purpose of export of software" 3. This condition has been modified by notification 1/2017-Cus dated 20-1-2017 as follows: "(ii) the goods shall only be used for the purpose of export of software by the STP units located in the premises of ISP" 4. This amended condition is relevant for the period of dispute. It is undisputed that ILPL used the imported goods to provide common service centre for the units located in the STP some of which were STP units and others were non- STP units. STP is treated as a custom bonded area and goods imported and used in it are treated as if the goods have not been cleared for home consumption and....
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....PL has not fulfilled the condition of the notification. If the Commissioner found that the condition was not fulfilled, she should have denied the entire exemption sought under the notification and confirmed the demand. It is also the contention of the Revenue that the Commissioner gave the benefit of depreciation available under the notification without any basis. This benefit is available if the importer is eligible for the exemption notification and after some period, decides to debond the goods. If ILPL is not entitled to the benefit of the exemption notification at all, it cannot get the benefit of a lower value reckoned in the exemption notification. Therefore, duty should be charged on the full value of the goods as proposed in the show cause notice. 8. On the other hand, it is the case of ILPL that it has largely used the imported goods for STP units but has also used it for some non-STP units. It has achieved the Net Foreign Exchange requirement as required under the policy. It has not used the imported goods except in STP area. As an ISP, it provides infrastructural support to the units in the STP and does not export software by itself. Since there was inadequate....
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....ion available under this notification into a proportionate partial exemption. The Commissioner has no power to modify an exemption notification while applying it. 13. It would be proper to examine Section 25 of the Customs Act under which exemptions from duty are granted. It reads as follows: "SECTION 25. Power to grant exemption from duty (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable. (2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of....
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....referred to in section 6 and section 7, respectively, of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (80 of 1976), and imported prior to the 7th day of February, 2002 shall be deemed to be and shall always be deemed to have been exempted from the whole of the duties of customs leviable on such mineral oils and accordingly, notwithstanding anything contained in any judgement, decree or order of any court, tribunal or other authority, no suit or other proceedings in respect of such mineral oils shall be maintained or continued in any court, tribunal or other authority. (8) Notwithstanding the exemption provided under sub-section (7), no refund of duties of customs paid in respect of the mineral oils specified therein shall be made." 14. From the above, it is clear that sub-section (1) of Section 25: (a) confers on the Government the power to grant exemption from duty under Section 25 of the Customs Act; (b) such exemption can be generally or subject to conditions to be fulfilled; and (c) the conditions can be prior to the clearance of the goods or after the c....
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....cation is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. 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." In the above passage, no doubt this Court observed that "when two views of a notification are possible, it should be construed in favour of the subject as notification is part of fiscal document". This observation may appear to support the view that ambiguity in a notification for exemption must be interpreted ....
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....(S.C.)] case (supra). 48. The next authority, which needs to be referred is the case in Mangalore Chemicals [Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes - (1992) Supp. 1 SCC 21] (supra). As we have already made reference to the same earlier, repetition of the same is not necessary. From the above decisions, the following position of law would, therefore, clear. Exemptions from taxation have tendency to increase the burden on the other unexempted class of taxpayers. A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject in case of ambiguity. 49. The ratio in Mangalore Chemicals case (supra) was approved by a three-Judge Bench in Novopan India Ltd. v. Collector of Central Excise and Customs, 1994 Supp (3) SCC 606 = 1994 (73) E.L.T. 769 (S.C.). In this case, probably for the first time, the question was posed as to whether the benefit of an exemption notification should go to the subject/assessee when there is ambiguity. The three-Judge Bench, in the background of English and ....
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....y applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored. 52. To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." 16. This judgment clarifies that exemption notifications must be interpreted strictly and if the case does not fall within the parameters, the benefit cannot be given. Any benefit of doubt must be given to the Revenue and sh....