2008 (2) TMI 367 - HC - Central Excise

Availability of exemption under Notification 175/86-C.E. Notification is to encourage Central and State Govt. - appellant is a Government owned corporation where all the shares are either hold by the Government or the designated of the officers of the Government for subsequent period exemption made applicable to Small Industries Corporation under control of State Govt. - contention of the appellant that benefit of the exemption should be made available, is acceptable

Summary

Issues:
Availability of exemption under Notification 175/86-C.E. for a government-owned corporation where all shares are held by the government or its officers in official capacity.

Analysis:
1. The appellant, a government-owned corporation, challenged the decision of Respondent No. 2 regarding the availability of exemption under Notification 175/86-C.E. The company's shares are held by the government or its officials, raising the question of eligibility for the exemption.

2. The learned single Judge rejected the writ petition, stating that the company, despite being an instrumentality of the State Government, remains a separate legal entity capable of entering contracts and enforcing obligations. The judgment cited a Supreme Court decision to support this conclusion.

3. The appellant argued that the intention of the notification was to encourage government enterprises, and a purposive interpretation should be adopted. The appellant highlighted another Supreme Court decision that was more applicable to the case, emphasizing that subsequent amendments clarified the intention to benefit government-owned corporations.

4. The Court acknowledged that the appellant is a government-owned corporation and interpreted the amendment to the notification as clarificatory, aiming to reflect the original meaning and intention. Reference was made to a Bombay High Court decision approved by the Supreme Court to support this interpretation.

5. The Court differentiated the present case from the Supreme Court decision cited by the single Judge, emphasizing the need for a purposive interpretation to fulfill the notification's intention of supporting government entities. Previous decisions by CEGAT also favored the appellant, indicating a consistent approach to granting exemptions to similar cases.

6. Considering the decisions and the notification's intention, the Court accepted the appellant's contention and ruled in favor of granting the exemption, overturning the single Judge's decision and quashing the orders by Respondents 1 and 2.

7. The Court clarified that any concession made during the previous proceedings did not bind the parties on a question of law, and the appellate court had the authority to take a different view. The appeal was allowed, and the appellant was granted the benefit of the exemption under Notification 175/86 for the relevant year, with no costs incurred.