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TMI Blog2023 (10) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the country un-competitive with the goods being exported from elsewhere. Hence all such notifications which provide for disburdening the exports from the domestic taxes need to be interpreted with the above objective in mind. There are no merits in the impugned order by holding that this calculation has to be done shipping bill wise and rebate claim rejected where the difference arrived at in respect of those shipping bills where the papers arrived at is less than twenty percent when such a condition is not prescribed by the notification. The grounds for denial had been stated in the show cause notice but the same were never taken up by the original authority for denying/ modifying the rebate/ refund claim made by the appellant. The grounds on which the rebate/ refund claim made by the appellant was rejected by the original authority has not been agreed to by the Commissioner (Appeals). He has to that extent of merits of the order set aside the order of original authority but goes on to uphold the denial of the refund claims made in respect of the shipping bills mentioned in para 2 3 of the Show Cause Notice. Such an approach were by Commissioner (Appeal) decides the appeal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5 Now I take up the other issues. I find that in column (4) of the Form A-1 given in the said notification, it has been specifically laid down that the original invoices are to be attached. Also, it has been settled by the Hon'ble Larger Bench of the CESTAT in the case of Commissioner of C.Ex. vs. Avis Electronics Pvt. Ltd. 2000 (117) E.L.T. 571 (Tri-LB) that when a particular thing is directed to be performed in a manner prescribed by Rules, it should be performed in that manner itself and not otherwise. Thus, when the appellant had not enclosed the original invoices in respect of the service providers mentioned in Para 1 of the Show Cause Notice dated 28.11.2014, I find that the appellant are not eligible for the refund of the Service Tax, wherever they had not provided the original invoices of these service providers. 4.6 So far as the ground raised in Para 2 of the Show Cause Notice dated 28.11.2014, is concerned, it has already been discussed in Para 4.3 above, that the said difference has to be less than twenty percent of the rebate available under the procedure specified in Para 2 of the said notification, in respect of each of the shipping bills. Thus, I find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of shipping bills the refund claimed was not in terms of clause (c) of Para-1 of the said notification, in respect of some of shipping bills the credit involved was less than Rs.500/- and not in terms of Para 3 (j) of the said notification, in respect of some of shipping bills the percentage of refund was more than 0.50% of the FOB value, without accompanying with the Certificate of Chartered Accountant, supporting invoices of Banking & other Financial services do not match with the shipping bills and annexure to Form A-1 and the appellant had used Clearing & Forwarding Agent Services, Courier Service & Customs House Agent Services, before the port of export and not beyond the place of removal, as required under the said notification. Accordingly, show cause notice dated 28.11.2014 was issued to the appellant proposing to rejection of refund claim. 2.3 The refund claim was rejected by the Original Authority by observing that port of export was the place of removal and Clearing & Forwarding Agent Service, Courier service and Customs House Agent Service, were not used beyond the port of export i.e. place of removal. The supporting invoices in respect of Banking & other Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 945(E), dated the 30th December, 2011, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby grants rebate of service tax paid (hereinafter referred to as rebate) on the taxable services which are received by an exporter of goods (hereinafter referred to as the exporter) and used for export of goods, subject to the extent and manner specified herein below, namely :- Provided that - (a) the rebate shall be granted by way of refund of service tax paid on the specified services Explanation. - For the purposes of this notification,- (A) "specified services" means - (i) in the case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods; (ii) in the case of goods other than (i) above, taxable services used for the export of said goods; (B) "place of removal" shall have the meaning assigned to it in section 4 of the Central Excise Act,1944(1 of 1944);. (b) the rebate shall be claimed either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be calculated by applying the rate prescribed for goods of a class or description, in the Schedule, as a percentage of the FOB value of the said goods; (f) amount so calculated as rebate shall be deposited in the bank account of the exporter; (g) shipping bill or bill of export on which rebate has been claimed on the basis of rate specified in the Schedule, by way of procedure specified in this paragraph, shall not be used for rebate claim on the basis of documents, specified in paragraph 3; (h) where the rebate involved in a shipping bill or bill of export is less than rupees fifty, the same shall not be allowed; (3) the rebate shall be claimed in the following manner, namely:- (a) rebate may be claimed on the service tax actually paid on any specified service on the basis of duly certified documents; (b) the person liable to pay service tax under section 68 of the said Act on the taxable service provided to the exporter for export of goods shall not be eligible to claim rebate under this notification; (c) the manufacturer-exporter, who is registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, shall file a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership firm, the documents enclosed with the claim shall be self-certified by the exporter and if the exporter is a limited company, the documents enclosed with the claim shall be certified by the person authorised by the Board of Directors; (B) the documents enclosed with the claim shall also contain a certificate from the exporter or the person authorised by the Board of Directors, to the effect that specified service to which the document pertains has been received, the service tax payable thereon has been paid and the specified service has been used for export of the said goods under the shipping bill number; (i) where the total amount of rebate sought under a claim is more than 0.50% of the total FOB value of the goods exported, the procedure specified in clause (h) above shall stand modified to the extent that the certification prescribed thereon, in sub-clauses (A) and (B) shall be made by the Chartered Accountant who audits the annual accounts of the exporter for the purposes of the Companies Act, 1956 (1 of 1956) or the Income Tax Act, 1961(43 of 1961), as the case may be; (j) where the rebate involved in a claim is less than rupees five hundred, the same sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rebate, in terms of the procedure as per (3) and that as per (2) is less than 20%. There is no condition prescribed in the Notification as per which the rebate claims as admissible under (2) and (3) are to be calculated for the difference shipping bill wise for the purpose of determining eligibility as per this condition shipping bill wise. It is settled position in law that any notification needs to be interpreted strictly on the basis of the words used in the notification and not by interpolating or extrapolating anything further in the wordings of the notification. Hon'ble Supreme Court has in the case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)] held as follows: "28. With the above understanding the stage is now set to consider the core issue. In the event of ambiguity in an exemption notification, should the benefit of such ambiguity go to the subject/assessee or should such ambiguity should be construed in favour of the revenue, denying the benefit of exemption to the subject/assessee? There are catena of case laws in this area of interpretation of an exemption notification, which we need to consider herein. The case of Commissioner of Inland Revenue v. James Forrest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies was not similar to those mentioned in the exemption notification. The majority extensively relied on the history and origin of Ministry of Industries and Supplies and concluded that the functions of the aforesaid Ministry were different from the erstwhile departments mentioned under the exemption provision. The majority reasoned that the exemption being the creation of the statute itself, it should have to be construed strictly and the interpretation cannot be extended to sales to other departments. We might find some clue as to the content of a strict construction also. It was canvassed before the Court that the object of Section 5(2)(a)(iii) of the relevant statute, was to give exemption not to the particular departments but to the sale of such goods to those departments and, therefore, sale of those goods made to any Departments of the Government of India, which came to be charged with the duty of purchasing those goods should also come within the purview of the exemption. The Court while repelling the aforesaid interpretation, reasoned as under : "We are unable to accept this line of reasoning. This interpretation will unduly narrow the scope and ambit of the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority could not find the justification to apply strict interpretation as the exemption notification was broad enough to include exemptions for commodities purchased by the Government of India. The Court was of the opinion that the strict interpretation provided by the majority was uncalled for as there was no additional burden on others by giving such exemptions. The relevant observations are as follows - "The High Court referred to the observations of Lord Halsbury in the case of Commissioner of Inland Revenue v. James Forrest (1890) 15 AC 334, to the effect that exemptions from taxation should be strictly construed because otherwise the burden of taxation will fall on other members of the community. Those observations, in my opinion, have no relevance to the facts and circumstances of the present controversy, because we know that the exemption was granted to the Government of India in the department dealing with purchase of certain commodities and articles without reference to quantity. As already pointed out, the Indian Stores Department was concerned with purchase of stores for public services on behalf of all Central Departments of Government and local Government, etc., and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Court was whether the appellant who got the cotton fabric produced from one of the registered co-operative society was also covered under the aforesaid notification. It may be of some significance that the revenue tried to interpret the aforesaid exemption by relying on the purposive interpretation by contending that the object of granting the above exemption was to encourage the formation of co-operative societies which not only produced cotton fabrics but also consisted of members, not only owning but having actually operated not more than four powerlooms during the three years immediately preceding their having joined the society. The policy was that instead of each such member operating his looms on his own, he should combine with others by forming a society to produce clothes. It was argued that the goods produced for which exemption could be claimed must be goods produced on his own and on behalf by the society. The Court did not countenance such purposive interpretation. It was held that a taxing legislation should be interpreted wholly by the language of the notification. The relevant observations are : "It is well-established that in a taxing statute there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interpreting it. When the question is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption 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) E.L.T. 3 (S.C.) [hereinafter referred as 'Hari Chand case' for brevity]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. After considering the various authorities, some of which are adverted to above, we are compelled to observe how true it is to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed (we are justified to say this) that the position is well-settled in the interpretation of a taxing statute : It is the law that any ambiguity in a taxing statute should enure to the benefit of the subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of revenue - and such exemption should be allowed to be availed only to those subjects/assesses who demonstrate that a case for exemption squarely falls within the parameters enumerated in the notification and that the claimant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. 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." In the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of Mother Superior Adoration Convent [2021 (376) E.L.T. 242 (S.C.)] observed as follows: "22. A recent 5-Judge Bench judgment was cited by Shri Gupta in Commr. of Customs v. Dilip Kumar & Co. - (2018) 9 SCC 1 = 2018 (361) E.L.T. 577 (S.C.). The 5-Judge Bench was set up as a 3-Judge Bench in Sun Export Corporation v. Collector of Customs - 1997 (6) SCC 564 = 1997 (93) E.L.T. 641 (S.C.) was doubted, as the said judgment ruled that an ambiguity in a tax exemption provision must be interpreted so as to favour the assessee claiming the benefit of such exemption. This Court after dealing with a number of judgments relating to exemption provisions in tax statutes, ultimately concluded as follows : "66. To sum up, we answer the reference holding as under : 66.1 Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2 When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective in mind. 4.7 I do not find any merits in the impugned order by holding that this calculation has to be done shipping bill wise and rebate claim rejected where the difference arrived at in respect of those shipping bills where the papers arrived at is less than twenty percent when such a condition is not prescribed by the notification. My view is in accordance with settled law as per the decisions referred above, that a notification needs to be interpreted on the basis of the conditions specified on the basis of word used in the notification without any addition or subtraction. Hence I do not find any merits in the interpretation given by the Commissioner (Appeal) in the impugned order. 4.8 Further, I find that Commissioner (Appeals) in his order has decided those issues which were never considered as ground for denial by the Original Authority though stated in the show cause notice. In an appellate proceeding Commissioner (Appeals) should have confined himself to the order challenged before him. Accordingly, denial on these grounds in appeal proceedings by the Commissioner (Appeals) cannot be justified. Section 35 A (3) of the Central Excise Act, 1944 read as follows: "T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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