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TMI Blog2020 (2) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... sell cotton hank yarn, he cannot be deprived of the exemption on the other yarns sold in hank form, so long as Entry 44, in its present form, stands for interpretation by Courts. The Hank Yarn of others types of Yarns like Silk for Handloom Kancheepuram and Banarasi Silk Sarees, Khadi Slik, Linen fabric are also used by Handloom Industry. Therefore, we do not appreciate why exemption should be restricted only to Cotton Hank Yarn, as contended by Revenue. Entry 44 never meant a harm to be caused to other type of yarns sold in Hank form, by denying exemption to them. In the light of the said Budget Speech of the year 2006-2007 also, there is nothing specifically mentioned to state that there was any intention to restrict the exemption of Hank yarn only to the cotton hank yarn and not others. Cotton hank yarn as well as other types of yarn in hank form are equally entitled to exemption under Entry 44 and therefore, Handloom Industry stood encouraged by said exemption. Was there any intention of State to harm Powerloom Industry by denying exemption to other types of Yarn sold in Hank form. The answer is an emphatic 'No'. Merely because Cotton hank yarn is the chief raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 portable form, which is done after twisting/winding to wrap yarn carefully for processing in yarn form and unwinding it later, either in the power loom industries or handloom industries of the textile sector. The reeled yarn is carefully tie-banded to control fibres during handling, scouring, dyeing and unwinding. The yarn Mills adopt this method of putting up yarn to a large extent for transportation to their customers, as the skeins / hanks can be packed in bags or bales and transported without damage and often such customers require the yarn to be put up in this manner, since it is the most convenient form in which filling yarn for certain kinds of goods can be subjected to such processes as bleaching, dyeing, mercerizing, polishing, printing and so on. 5. Thus, Hank Yarn is not a commodity because of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 to be given to promote the handloom industries and since handloom industries majorly uses only Cotton Hank Yarn and therefore, Cotton Hank Yarn only can be exempted from payment of VAT are misconceived. In view of the clear exemption Entry and for want of any specific curtailment of the said Entry, Hank Yarns or specific types of Yarn, namely Cotton Yarn as contended by the Revenue, the appellant, who is the manufacturer of Viscose Staple Fiber Yarns or Polyester Yarns, which is admittedly and undoubtedly packed in Hank form, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 necessary in public interest to extend the exemption from VAT to their raw material in the form of Cotton Hank Yarn and the mere omission of the word 'Cotton' in Entry 44 in the Fourth Schedule does not entitle the Assessee Company to avail such exemption on VSF or PFA Hank Yarn, which was never meant for them and was meant only for Cotton Hank Yarn. 14. The learned Special Government Pleader further submitted that the learned Commissioner was justified in issuing the impugned Clarifications under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 assessee. There are several important considerations which incline us to accept this construction of Section 52 sub-section (2). (emphasis supplied) 16. The judgement of the Honourable Supreme Court in K.P.Varghese was on Section 52(2) of the Income Tax Act, which provided that if the market value of the assets sold exceeded 15% of the full value disclosed as consideration in the instrument of sale or Transfer of Property, then invoking Section 52(2) of the Act, whether the Income Tax of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 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. 20. We are unable to agree with the contention of the learned Special Government Pleader for the Revenue. The intention, if any, of the State could have been very well expressed in clear terms of the Entry 44 itself. Nothing prevented the State from writing Entry 44 as 'Cotton Hank Yarn' or 'Hank yarn sold to Handloom Industries'. We cannot import external aids of interpretation where the plain meaning of the terms of the statute, namely the exemption Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain 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 is especially so in fiscal statutes and penal statutes. Nevertheless, 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. Not only that, if the plain construction leads to anomaly and absurdity, the court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T), 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 case was decided by a Bench comprising of three Judges. Hence, this matter came to be placed before this Bench of five Judges. The issue involved in this reference was whether the ruling given in Sun Export case was the correct law i.e. whether when there is an ambiguity in an exemption notification or exemption clause the benefit of such ambiguity can be extended to the assessee? Overruling Sun Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Order, 1949 or the Part B States (Taxation Concessions) Order, 1950 would be exempt from payment of income tax. Para 15(iii) of the Part B States (Taxation Concessions) Order, 1950 grants exemption to the bona fide annual value of the residential palace of the Ruler of a State, which is declared by the Central Government to be Ruler's ancestral property from payment of income tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication 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 as under: 16. We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals [1992 Supp (1) SCC 21] - and in Union of India v. Wood Papers [(1990) 4 SCC 256 : 1990 SCC (Tax) 422] referred to therein - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, 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 fabrics produced by any Co-operative Society formed of owners ,of cotton powerlooms which is registered or which may be registered on or before March 31, 1961 subject to four conditions set out in the notification. In the next notification, dated April 30, 1960 exemption was granted to cotton fabrics. produced on powerlooms owned by any cooperative societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. 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 Equity, what the Legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication. It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Legislature is to be gathered from the language of the statute itself and no external evidence such as Parliamentary Debates , Reports of the Committees of the Legislature or even the statement made by the Minister on the introduction of a measure or by the framers of the Act is admissible to construe those words . It is only where a statute is not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 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 Hank yarn only to the cotton hank yarn and not others. Cotton hank yarn as well as other types of yarn in hank form are equally entitled to exemption under Entry 44 and therefore, Handloom Industry stood encouraged by said exemption. Was there any intention of State to harm Powerloom Industry by denying exemption to other ty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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