TaxTMI 
TaxTMI 
2026 (5) TMI 369
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....rvice during the period April 2015 to December 2015 on the grounds that the exemption notification claimed by them in their ST-3 returns was not relevant as also the fact that they had not fully complied with the procedure prescribed in terms of Notification No. 31/2012-ST dated 20.06.2012. 3. Learned Advocate for the appellant is mainly contesting that during the material time they are relying on Notification No. 25/2012 dated 20.06.2012 and however the said exemption was withdrawn by Notification No. 06/2015 dated 01.03.2015 with effect from 01.04.2015. Therefore, though the said exemption was not applicable in terms of the product being exported by them, they were still eligible for benefit under Notification No. 31/2012-ST dated 20.06.2012 in respect of GTA service for export of coffee. The Department, however, felt that they have not complied with the conditions of notification in as much as they failed to file form EXP-1 and EXP-2 for the period April 2015 to December 2015. Learned Advocate is relying on the judgment of the Co-ordinate bench in the case of M/s Prachi Leathers Pvt Ltd., Vs Commissioner of Central Excise, Kanpur [2024 (4) TMI 1313 (CESTAT-ALL)] in respect of....
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....to Column (3)) of the table are mandatory in nature, whereas those specified are procedural in nature and therefore the appellants having complied with the conditions as specified in Column 4 (actually Column 3) they will be eligible for benefit of this notification. Para 4.4 is relevant and cited below for ready reference: 4.4 We find that the conditions of notification could be classified under the category of mandatory and procedural conditions. As per the mandatory conditions of this notification the exemption should have been claimed by the appellant by way of indication of details of the commission paid or being paid on the shipping bills filed by the appellant. Conditions specified in column 4 of the table in notification are mandatory whereas those specified are procedural in nature. Appellant has complied with the conditions as specified in column 4 and hence is eligible to benefit of this notification. It is settled law that an exemption notification should at the stage of entry to be interpreted in a very strict manner but once it is held that the appellant falls within the parameters of the notification, the notification should be interpreted regularly so as no....
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.... (1989) 1 SCC 345, it was held "Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally". The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case (supra), which reads - "... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principles requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of inte....
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.... well-known principle that a person who claims an exemption has to establish his case. ... The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 = 1990 SCC (Tax) 422 = JT (1991) SC 151]." Three important aspects which comes out of the discussion are the recognition of horizontal equity by this Court as a consideration for application of strict interpretation, subjugation of strict interpretation to the plain meaning rule and interpretation in favour of exclusion in light of ambiguity. 38. We will now consider another Constitution Bench decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260....
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....h are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption." 39. The Constitution Bench then considered the doctrine of substantial compliance and "intended use". The relevant portions of the observations in paras 31 to 34 are in the following terms - "31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished... Doctrine of substantial compliance and "intended use" 32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", ....
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....n 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." 40. ..... 41. ..... 42. ..... 43. ..... 44. In Hansraj Gordhandas case (supra), the Constitutional Bench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial. 45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether nonalcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the iss....
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....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 to benefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows : "... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held 'that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage ....