9911796707
TMI Blog2016 (9) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the lorry receipt and corresponding shipping bill, on account of the peculiar nature of the trade, cannot be a ground for denying the benefit of the exemption notification. But unfortunately for the Assessee, condition No.3 cannot be construed as a mere matter of procedure. It is a matter of evidence. The original notification dated 6.10.2007 did not make the applicability of exemption, conditional. But by an amendment to the original notification, the grant of exemption was made conditional. Therefore, the object of the amendment is very clear to the effect that proof of eligibility to claim exemption was made equivalent to the eligibility for exemption. The object of requiring the details of exporters invoice to be mentioned in the lorry receipt and the corresponding shipping bill is to ensure that what had reached the port was actually the consignment of that exporter and that there was no duplication of the claim. Therefore, the relaxation of such a condition would tantamount to the removal of the very life breath of the notification. Hence, the first question of law is to be answered in favour of the Revenue and against the Assessee. Whether the theory of substantial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int 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. Therefore, what can be condoned, is that which is not the essence of the thing to be done, but that which is prescribed merely for the orderly conduct of the business. In the case on hand all the four conditions stipulated in the amended notification, are intended to ensure that there are checks and balances for the authority conferred with the power of processing the application for exemption to arrive at a subjective satisfaction that the requirements are fulfilled. If the Courts recognise some amount of latitude for the authorities, who are vested with the power to process the application for exemption, then the same may tantamount to enlarging the scope of the discretionary power on the part of those authorities. Many times the exercise of discretion, one way or the other, leads to complications, when there are no guidelines for the exercise of the power of discretion. Once a full-fledged system is put in place, for the exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax by an order in original dated 2.2.2010. 6. The respondent/Assessee filed 3 appeals as against the rejection of 3 different claims for refund. All the 3 appeals in Appeal Nos.67, 68 and 69 were rejected by the Commissioner (Appeals) by a common order dated 27.7.2010. But the order of the Commissioner (Appeals) was reversed by CESTAT by an order dated 31.3.2015 passed on 3 appeals filed by the respondent/ Assessee. To come to the conclusion that the Assessee deserved to succeed, the Tribunal relied upon the decision of the another Bench in Jumbo Mining Ltd., v. Commissioner of Central Excise, Hyderabad (2012 (26) STR 525), wherein the Tribunal granted relief on the ground that consignments of huge quantity cannot be transported by a single lorry and that they are required to be aggregated at the port before shipping documents could be prepared. The Tribunal held that strict compliance of the condition for the grant of exemption, cannot be made. 7. Aggrieved by the said order of the CESTAT, the Revenue has come up with the above appeals, raising about 7 substantial questions of law in their memorandum of appeal. 8. But a careful perusal of the material papers would show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) wherever applicable, a copy of the written agreement entered into by the exporter with the buyer of the said goods, as the case may be; SCHEDULE S.No. Taxable Services Conditions Classification under Finance Act, 1994 Description (1) (2) (3) (4) 1. Section 65 (105)(d) Services provided to an exporter by an insurer, including a re-insurer carrying on general insurance business in relation to insurance of said goods. (i) document issued by the insurer, including re-insurer, for payment of insurance premium shall be specific to export goods and shall be in the name of the exporter. 2. Section 65 (105)(zn) Services provided for export of said goods 3. Section 65 (105) (zzh) Services provided by a technical testing and analysis agency in relation to technical testing and analysis of said goods where such technical testing and analysis is required to be undertaken as per the written agreement between the exporter and the buyer of the said goods. (i) the exporter furnishes a copy of the written agreement entered into with the buyer of the said goods requiring testing and analysis of the said goods; and (ii) the invoice issued by the service provider shall be specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , unconditionally. Hence, if an exporter was claiming the benefit of the notification dated 6.10.2007, in relation to the taxable services included at S.No.6 of the table under the schedule, he would not have been required to satisfy any condition. 14. But the Notification dated 6.10.2007 was amended by the Notification No.3/2008, dated 19.2.2008. The relevant portion of the table under the Schedule to the Notification, relatable to S.No.6 was amended by the Notification dated 19.2.2008. The amendment reads as follows: (1) (2) (3) (4) 6. Section 65 (105) (zzp) Services provided to an exporter in relation to transport of export goods directly from the place of removal, to inland container depot or port or airport, as the case may be, from where the goods are exported (i) export goods are transported directly from the place of removal to inland container depot or port or airport, as the case may be, from where the goods are exported, (ii) invoice issued by the exporter in relation to export goods shall indicate the name of the inland container depot or port or airport from where the goods are exported. (iii) details of exporters invoice relating to export goods are specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial compliance with the exemption notification. 18. Placing reliance upon the decisions of the Supreme Court in Union of India and others v. Woodpapers Limited and another , Bhai Jaspal Singh and another v. Assistant Commissioner of Income Tax and others (2011) 1 SCC 39 and Commissioner of Customs Mumbai v. M. Ambalal and Company (2011) 2 SCC 74 , it is contended by Mr. S. Sriram, learned counsel for the respondent/Assessee that an exemption notification has to be interpreted, by applying different rules of construction at different stages or levels. At the threshold, an exemption notification is to be construed strictly, to find out whether a subject falls within the notification or not. Once it is found that the Assessee falls within the purview of the notification, then a wider and liberal construction has to be adopted. 19. Drawing our attention to a few paragraphs of the above decisions, it is further contended by Mr. S. Sriram, learned counsel for the respondent/Assessee that there is no dispute in the case on hand about the eligibility of the respondent to the benefit of the exemption notification. The respondent/Assessee, according to the learned counsel, has satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion treated two named departments of the Government of India as distinct entities from others. Consequently, the Court held that the supplies made to any department other than those two departments, may not qualify for exemption. 23. In Hansraj Gordhandas vs. Assistant Collector of Central Excise and Customs, Surat {AIR 1970 (SC) 755}, a Constitution Bench of the Supreme Court held that "the operation of (exemption) notifications had to be judged not by the object which the rule making authority had in mind, but by the words which it had employed to effectuate the legislative intent". The Court also held that "in a taxing statute there is no room for any intendment" and that "the entire matter is governed wholly by the language of the notification". While quoting Lord Watson that "intention of the legislature is a common but very slippery phrase", the Constitution Bench laid down the law as follows:- "If the tax-payer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bench held in para-16 as follows:- "The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State." 26. Quoting with approval, the above ratio in Novopan, another bench held in Liberty Oil Mills (P) Ltd., -vs- Collector of Central Excise {(1995) 1 SCC 451} that in case of ambiguity or doubt regarding an exemption provision in a fiscal statute, the ambiguity or doubt will be resolved in favour of the revenue and not in favour of the assessee. The ratio laid down in Wood Papers Ltd, which was followed in Novopan, was quoted with approval, as late as in 2004, by the Apex Court in Associated Cement Companies vs. State of Bihar {2004 (7) SCC 642}. Again in CCE -vs- Ginni Filaments Ltd {(2005) 3 SCC 378} it was held that an exemption notification h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirements (1) of export of iron ore; (2) of payment of service tax on the service of transportation of material from the place of removal to the port; and (3) of actual export of the material. Therefore, the failure to have the details of the exporters invoice mentioned in the lorry receipt and corresponding shipping bill, on account of the peculiar nature of the trade, cannot be a ground for denying the benefit of the exemption notification. 32. But unfortunately for the respondent/Assessee, condition No.3 cannot be construed as a mere matter of procedure. It is a matter of evidence. As we have indicated earlier, the original notification dated 6.10.2007 did not make the applicability of exemption, conditional. But by an amendment to the original notification, the grant of exemption was made conditional. Therefore, the object of the amendment is very clear to the effect that proof of eligibility to claim exemption was made equivalent to the eligibility for exemption. 33. The Courts always tell statutory authorities that if something is required to be done by law in a particular manner, it shall be done only in that manner and not otherwise. After repeatedly advising statutory au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation officer, but directed re-examination of the question of applicability of the notification. At the time of re-examination by the adjudicating Commissioner, the Assessee contended (1) that they despatched the goods to their final manufacturing units through transfer challans, and receipts were also recorded in Form-IV register and the utilisation of the goods was recorded in RG-12 register; and (2) that the manufacture of final products could be ascertained through RG-1 register maintained at the recipient end. These, according to the Assessee, established substantial compliance with the procedure set out in Chapter-X for duty exemption. 38. In Commissioner of Central Excise v. Hari Chand Shri Gopal (2011) 1 SCC 236, heavy reliance was placed by the Assessee on the decisions of the Supreme Court in Thermax (P) Ltd., v. Collector of Customs (1992) 4 SCC 440 and CCE v. J.K. Synthetics (2000) 10 SCC 393, wherein the Supreme Court held that the benefit of exemption notification cannot be denied if there has been a substantial compliance with the procedure and if the intended use of the goods for the manufacture of final product had been established. The said contention was accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. 43. After expressing an opinion as aforesaid, the Supreme Court considered the previous decisions in Novopan India Ltd., and Hansraj Gordhandas in para-30, and indicated the distinction between the provisions which are directory and those which are mandatory in para-31, as follows: 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 their nature, on the other, must be kept clearly distinguished. In TISCO Ltd. this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification, are intended to ensure that there are checks and balances for the authority conferred with the power of processing the application for exemption to arrive at a subjective satisfaction that the requirements are fulfilled. If the Courts recognise some amount of latitude for the authorities, who are vested with the power to process the application for exemption, then the same may tantamount to enlarging the scope of the discretionary power on the part of those authorities. Many times the exercise of discretion, one way or the other, leads to complications, when there are no guidelines for the exercise of the power of discretion. Once a full-fledged system is put in place, for the exercise of discretion, the compliance with the requirements of such a system alone will remove any kind of arbitrary exercise of power. The Courts are obliged to interpret notifications of this nature, in such a manner that the power of discretion is reduced to the minimum. Therefore, the second substantial question of law is also to be answered in favour of the appellants/Revenue by holding that condition No.3 in the exemption notification at serial No.6 of the table under the schedule, is als ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
