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TMI Blog2021 (8) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision in the exemption notification to allow partial exemption - What the Commissioner has done is to convert the full exemption available under this notification into a proportionate partial exemption. The Commissioner has no power to modify an exemption notification while applying it. What the Commissioner has done is to convert the full exemption available under this notification into a proportionate partial exemption. The Commissioner has no power to modify an exemption notification while applying it. If the conditions of the exemption notification were not fulfilled, can the adjudicating authority still give the benefit of the exemption notification or will it amount to modifying the exemption notification? - HELD THAT:- Section 111(o) of the Customs Act, 1962 states that any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer. The matter is remanded to the Adjudicating Authority to pass an order citing specific provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 are still within the Customs Area. There are exemption notifications which deal with the goods imported into them. Often, after sometime, the importer may want to de-bond the goods, i.e., clear them for home consumption due to many reasons. For instance, the entire STP may be dissolved and converted into domestic area after obtaining permission from the Development Commissioner or the goods may have to be replaced with newer and better goods and the existing goods sold in the domestic market. At that stage, the amount of duty payable is calculated and the importer will have to pay the duty but generally on a lower, depreciated value. 5. In this case, ILPL applied for de-bonding of the goods. Condition (v) of the exemption notification 153/1993, as amended, provided for reckoning the depreciation to arrive at a value for calculation of duty. This condition reads as follows: (v) without prejudice to any other provision contained in this notification, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may, in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TP and does not export software by itself. Since there was inadequate demand for setting up the STP units, some portions of the STP area were given to non-STP unit without which, considering the market conditions, the STP could not have survived. What was imported is Telematic equipment which supported all the units situated in the STP area both which are STP units and those which are non-STP units. Even the non-STP units do export software. Merely because the facilities have also been allowed to be used by some non-STP units, they should not be denied the benefit of the exemption notification of the equipment which was used in providing the service. This is more so because the main objective of the STP, namely, achieving the Net Foreign Exchange requirement has been met by them. The exemption notification should not be interpreted literally but must be interpreted based on its purpose and since they fulfilled the purpose, they should be given full benefit of the exemption notification. 9. In short, both sides want the impugned order to be set aside. Revenue wants the matter to be remanded to the original authority after setting aside the impugned order. 10. We have consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette, at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be. (3) An exemption under sub-section (1) or sub-section (2) in respect of any goods from any part of the duty of customs leviable thereon (the duty of customs leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of customs chargeable on such goods shall in no case exceed the statutory duty. Explanation. - Form or method , in relation to a rate of duty of customs, mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious Courts, including the Supreme Court and quasi-judicial authorities towards interpretation of exemption notifications- strict or literal and liberal or purposive. In view of the divergent approaches taken in different cases, the matter was referred to a five member constitution Bench of the Supreme Court in Commissioner of Customs, Mumbai vs Dilip Kumar [(2018 (361) E.L.T. 577 (S.C.)] and it was held as follows: 45 . In Parle Exports case [Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345] (supra), a Bench of two-Judges of this Court considered the question whether non-alcoholic 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 issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, 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 basis under the notification in question‟. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emicals - and in Union of India v. Wood Papers, 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 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 50 . In Tata Iron Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held - The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d application of the exemption notification 153/1993 (as amended) giving partial exemption to the imported goods in proportion to the area, in the impugned order cannot be sustained because the adjudicating authority cannot modify the exemption notification even if it finds it is fair to do so. The Adjudicating authority can only decide whether the benefit of exemption notification is available to the importer or not. 18. This takes us to the next question which is: If the conditions of the exemption notification were not fulfilled, can the adjudicating authority still give the benefit of the exemption notification or will it amount to modifying the exemption notification? 19. If the Government had imposed some conditions in the notification which have not been fulfilled by the claimant, can the adjudicating authority or the officer even on such non-fulfilment of the conditions still give the benefit of the notification? The answer to this lies in section 111(o) of the Customs Act, 1962 which reads as follows: (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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