# COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v. M/S. DILIP KUMAR AND COMPANY & ORS

- **Citation:** [2018] 7 S.C.R. 1191
- **Court:** Supreme Court of India
- **Decided:** 2018-07-30
- **Case number:** Civil Appeal No. 3327 of 2007
- **Bench:** Ranjan Gogoi, N. V. Ramana, R. Banumathi, Mohan M. Shantanagoudar, S. Abdul Nazeer
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-customs-import-mumbai-v-m-s-dilip-kumar-and-company-ors-33676
- **Pages:** 41

## Headnote

Tax/Taxation:
Exemption Notification - Interpretation of - In case of
ambiguity in such Notification, whether the benefit of ambiguity
would go to assessee or Revenue - Held: Exemption Notification
should be interpreted strictly - The burden to prove the applicability
of the exemption Notification would be on the assessee - In case of
ambiguity, benefit of such ambiguity would go to Revenue and not
to assessee - *Sun Export case wherein it was held that benefit of
ambiguity would go to assessee is overruled.
Taxing statute and Exemption Notification - Interpretation of
- Held: There is distinction in interpreting a charging provision of
a taxation statute and in the interpretation of exemption Notification
- Any ambiguity in charging provision enures to the benefit of the
assessee, but any ambiguity in the exemption clause or exemption
Notification would go in favour of Revenue.
Interpretation of Statutes:
General principles of interpretation - Purpose of
interpretation - Tools of interpretation - Discussed.
Interpretation of fiscal statutes - Held: While interpreting
fiscal statutes court has to apply strict rule of interpretation.
'Plain meaning rule' of interpretation - Held: When language
in the statute is plain and unambiguous, Court has to seal and
understand the plain language as such, and there is no scope of
interpretation.
 [2018] 7 S.C.R. 1191
1191
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SUPREME COURT REPORTS
[2018] 7 S.C.R.
'Strict interpretation' and 'Literal interpretation' - Distinction
between - Held: All cases of literal interpretation would involve
strict rule of interpretation, but strict rule may not necessarily
involve the former, especially in the area of taxation - Thus strict
interpretation does not encompass strict literalism into its fold.
Interpretation of taxing statute - Rule of interpretation - Held:
Every taxing statute including charging, computation and exemption
clause (at the threshold stage) should be interpreted strictly.
Contextual or purposive interpretation - Of taxing statutes -
Held: In a taxation statute there is no room for any intendment - In
taxation statutes contextual or purposive interpretation cannot be
applied - Nor any resort be made to look to other supporting
material - Equity has no place in interpreting a tax statute.
Answering the referred question, the Court
HELD: 1.1 An Act of Parliament/Legislature cannot foresee
all types of situations and all types of consequences. It is for the
Court to see whether a particular case falls within the broad
principles of law enacted by the Legislature. Here, the principles
of interpretation of statutes come in handy. In spite of the fact
that experts in the field assist in drafting the Acts and Rules,
there are many occasions where the language used and the
phrases employed in the statute are not perfect. Therefore,
Judges and Courts need to interpret the words. [Para 14]
[1206-D, E]
1.2 The principles of interpretation have been evolved in
common law. It has also been the practice for the appropriate
legislative body to enact Interpretation Acts or General Clauses
Act. In all the Acts and Regulations, made either by the Parliament
or Legislature, the words and phrases as defined in the General
Clauses Act and the principles of interpretation laid down in
General Clauses Act are to be necessarily kept in view. If while
interpreting a Statutory law, any doubt arises as to the meaning
to be assigned to a word or a phrase or a clause used in an
enactment and such word, phrase or clause is not specifically
defined, it is legitimate and indeed mandatory to fall back on
General Clauses Act. Notwithstanding this, when there is
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repugnancy or conflict as to the subject or context between the
General Clauses Act and a statutory provision which falls for
interpretation, the Court must necessarily refer to the provisions
of statute. [Para 15] [1206-F-H]
1.3 The purpose of interpretation is essentially to know
the intention of the L

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COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI
v.
M/S. DILIP KUMAR AND COMPANY & ORS.
(Civil Appeal No. 3327 of 2007)
JULY 30, 2018
[RANJAN GOGOI, N. V. RAMANA, R. BANUMATHI,
MOHAN M. SHANTANAGOUDAR AND
S. ABDUL NAZEER, JJ.]
Tax/Taxation:
Exemption Notification - Interpretation of - In case of
ambiguity in such Notification, whether the benefit of ambiguity
would go to assessee or Revenue - Held: Exemption Notification
should be interpreted strictly - The burden to prove the applicability
of the exemption Notification would be on the assessee - In case of
ambiguity, benefit of such ambiguity would go to Revenue and not
to assessee - *Sun Export case wherein it was held that benefit of
ambiguity would go to assessee is overruled.
Taxing statute and Exemption Notification - Interpretation of
- Held: There is distinction in interpreting a charging provision of
a taxation statute and in the interpretation of exemption Notification
- Any ambiguity in charging provision enures to the benefit of the
assessee, but any ambiguity in the exemption clause or exemption
Notification would go in favour of Revenue.
Interpretation of Statutes:
General principles of interpretation - Purpose of
interpretation - Tools of interpretation - Discussed.
Interpretation of fiscal statutes - Held: While interpreting
fiscal statutes court has to apply strict rule of interpretation.
'Plain meaning rule' of interpretation - Held: When language
in the statute is plain and unambiguous, Court has to seal and
understand the plain language as such, and there is no scope of
interpretation.
 [2018] 7 S.C.R. 1191
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SUPREME COURT REPORTS
[2018] 7 S.C.R.
'Strict interpretation' and 'Literal interpretation' - Distinction
between - Held: All cases of literal interpretation would involve
strict rule of interpretation, but strict rule may not necessarily
involve the former, especially in the area of taxation - Thus strict
interpretation does not encompass strict literalism into its fold.
Interpretation of taxing statute - Rule of interpretation - Held:
Every taxing statute including charging, computation and exemption
clause (at the threshold stage) should be interpreted strictly.
Contextual or purposive interpretation - Of taxing statutes -
Held: In a taxation statute there is no room for any intendment - In
taxation statutes contextual or purposive interpretation cannot be
applied - Nor any resort be made to look to other supporting
material - Equity has no place in interpreting a tax statute.
Answering the referred question, the Court
HELD: 1.1 An Act of Parliament/Legislature cannot foresee
all types of situations and all types of consequences. It is for the
Court to see whether a particular case falls within the broad
principles of law enacted by the Legislature. Here, the principles
of interpretation of statutes come in handy. In spite of the fact
that experts in the field assist in drafting the Acts and Rules,
there are many occasions where the language used and the
phrases employed in the statute are not perfect. Therefore,
Judges and Courts need to interpret the words. [Para 14]
[1206-D, E]
1.2 The principles of interpretation have been evolved in
common law. It has also been the practice for the appropriate
legislative body to enact Interpretation Acts or General Clauses
Act. In all the Acts and Regulations, made either by the Parliament
or Legislature, the words and phrases as defined in the General
Clauses Act and the principles of interpretation laid down in
General Clauses Act are to be necessarily kept in view. If while
interpreting a Statutory law, any doubt arises as to the meaning
to be assigned to a word or a phrase or a clause used in an
enactment and such word, phrase or clause is not specifically
defined, it is legitimate and indeed mandatory to fall back on
General Clauses Act. Notwithstanding this, when there is
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repugnancy or conflict as to the subject or context between the
General Clauses Act and a statutory provision which falls for
interpretation, the Court must necessarily refer to the provisions
of statute. [Para 15] [1206-F-H]
1.3 The purpose of interpretation is essentially to know
the intention of the Legislature. Whether the Legislature intended
to apply the law in a given case; whether the Legislature intended
to exclude operation of law in a given case; whether Legislature
intended to give discretion to enforcing authority or to adjudicating
agency to apply the law, are essentially questions to which answers
can be sought only by knowing the intention of the legislation.
Apart from the general principles of interpretation of statutes,
there are certain internal aids and external aids which are tools
for interpreting the statutes. The long title, the preamble, the
heading, the marginal note, punctuation, illustrations, definitions
or dictionary clause, a proviso to a Section, explanation, examples,
a schedule to the Act etc., are internal aids to construction. The
external aids to construction are Parliamentary debates, history
leading to the legislation, other statutes which have a bearing,
dictionaries, thesaurus. [Paras 16 and 17] [1207-A-C]
1.4 A statute must be construed according to the intention
of the Legislature and the Courts should act upon the true
intention of the legislation while applying law and while
interpreting law. If a statutory provision is open to more than
one meaning, the Court has to choose the interpretation which
represents the intention of the Legislature. [Para 18] [1207-F]
District Mining Officer v. Tata Iron and Steel Co.,
(2001) 7 SCC 358 : [2001] 1 Suppl. SCR 147
- relied on.
1.5 The well settled principle is that when the words in a
statute are clear, plain and unambiguous and only one meaning
can be inferred, the Courts are bound to give effect to the said
meaning irrespective of consequences. If the words in the
statute are plain and unambiguous, it becomes necessary to
expound those words in their natural and ordinary sense. The
words used declare the intention of the Legislature. [Para 19]
[1208-E]
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v.
M/S. DILIP KUMAR AND COMPANY & ORS.
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SUPREME COURT REPORTS
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Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957
SC 907 : [1958] SCR 360 - relied on.
1.6 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.
[Para 20] [1208-G; 1209-A]
Assistant Commissioner, Gadag Sub-Division, Gadag
v. Mathapathi Basavannewwa, (1995) 6 SCC 355 :
[1995] 2 Suppl. SCR 807 - relied on.
1.7 In construing penal statutes and taxation statutes, the
Court has to apply strict rule of interpretation. Article 265 of the
Constitution prohibits the State from extracting tax from the
citizens without authority of law. It is axiomatic that taxation
statute has to be interpreted strictly because State cannot at their
whims and fancies burden the citizens without authority of law. In
other words, when competent Legislature mandates taxing
certain persons/certain objects in certain circumstances, it
cannot be expanded/interpreted to include those, which were not
intended by the Legislature. [Para 21] [1209-B-D]
1.8 'The plain meaning rule' suggests that when the
language in the statute is plain and unambiguous, the Court has
to read and understand the plain language as such, and there is
no scope for any interpretation. This salutary maxim flows from
the phrase "cum inverbis nulla ambiguitas est, non debet admitti
voluntatis quaestio". Following such maxim, the courts sometimes
have made strict interpretation subordinate to the plain meaning
rule, though strict interpretation is used in the precise sense.
To say that strict interpretation involves plain reading of the
statute and to say that one has to utilize strict interpretation in
the event of ambiguity is self-contradictory. [Para 22]
[1209-E-F]
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1.9 The principle of literal interpretation and the principle
of strict interpretation are sometimes used interchangeably. This
principle, however, may not be sustainable in all contexts and
situations. All cases of literal interpretation would involve strict
rule of interpretation, but strict rule may not necessarily involve
the former, especially in the area of taxation. Strict
interpretation does not encompass strict- literalism into its fold.
Simply juxtaposing 'strict interpretation' with 'literal rule' would
result in ignoring an important aspect that is 'apparent
legislative intent'. There may be overlapping in some cases
between the aforesaid two rules. 'Strict interpretation' does not
encompass such literalism, which lead to absurdity and go against
the legislative intent. If literalism is at the far end of the
spectrum, wherein it accepts no implications or inferences, then
'strict interpretation' can be implied to accept some form of
essential inferences which literal rule may not accept.
[Paras 24 and 25] [1210-G; 1211-C-D]
Punjab Land Development and Reclamation
Corporation Ltd., Chandigarh v. Presiding Officer,
Labour Court Chandigarh and Ors., (1990) 3 SCC
682 : [1990] 3 SCR 111 - relied on.
1.10 The other tools of interpretation, namely contextual
or purposive interpretation cannot be applied nor any resort be
made to look to other supporting material, especially in taxation
statutes. In a taxation statute, there is no room for any intendment;
that regard must be had to the clear meaning of the words and
that the matter should be governed wholly by the language of the
notification. Equity has no place in interpretation of a tax statute.
Nothing has to be read into nor should anything be implied other
than essential inferences while considering a taxation statute.
[Para 25] [1211-E-G]
Rajasthan Rajya Sahakari Spinning & Ginning Mills
Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC
672 : State Bank of Travancore v. Commissioner of
Income Tax, (1986) 2 SCC 11 : [1986] 1 SCR 25 ;
Commissioner of Income Tax v. Kasturi Sons Ltd.
(1999) 3 SCC 346 : [ 1999] 1 SCR 1207 ; State of West
Bengal v. Kesoram Industries Limited (2004) 10 SCC
201 : [2004] 1 SCR 564 - relied on.
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v.
M/S. DILIP KUMAR AND COMPANY & ORS.
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Cape Brandy Syndicate v. IRC (1921) 1 KB 64 ; Re,
Micklethwait (1885) 11 Ex 452 - referred to.
'Principles of Statutory Interpretation' by Justice G. P.
Singh ; Black's Law Dictionary (10th Edn.) - referred
to.
2.1 There is distinction in interpreting a taxing provision
(charging provision) and in the matter of interpretation of
exemption notification. In the matter of interpretation of charging
section of a taxation statute, strict rule of interpretation is
mandatory and if there are two views possible in the matter of
interpretation of a charging section, the one favourable to the
assessee need to be applied. [Para 12] [1205-E, F]
2.2 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 claimants satisfy all
the conditions precedent for availing exemption. [Para 40]
[1225-B, C]
2.3 Every taxing statue including, charging, computation
and exemption clause (at the threshold stage) should be
interpreted strictly. Further, in case of ambiguity in a charging
provisions, the benefit must necessarily go in favour of subject/
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. [Para 41] [1225-E-F]
2.4 In the governance of rule of law by a written
Constitution, there is no implied power of taxation. The tax power
must be specifically conferred and it should be strictly in
accordance with the power so endowed by the Constitution itself.
It is for this reason that the Courts insist upon strict compliance
before a State demands and extracts money from its citizens
towards various taxes. Any ambiguity in a taxation provision,
therefore, is interpreted in favour of the subject/assessee. The
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statement of law that ambiguity in a taxation statute should be
interpreted strictly and in the event of ambiguity the benefit
should go to the subject/assessee may warrant visualizing
different situations. 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, 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 should go
in favour of the revenue. [Para 43] [1226-A-F]
2.5 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. [Para 52] [1230-G]
2.6 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 favour of the revenue. [Para 52] [1230-H]
2.7 The ratio in *Sun Export case is not correct and all the
decisions which took similar view as in *Sun Export case stands
over-ruled. [Para 52] [1231-A]
Commissioner of Central Excise, New Delhi v. Hari
Chand Shri Gopal (2011) 1 SCC 236 : [2010] 13 SCR
820 - followed.
Sun Export Corporation, Bombay v. Collector of
Customs, Bombay (1977) 6 SCC 564 : [1997] 1 Suppl.
SCR 434 - overruled.
Hansraj Gordhandas v. H.H. Dave, Asst. Collector of
Central Excise & Customs, Surat and Ors., AIR 1970
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v.
M/S. DILIP KUMAR AND COMPANY & ORS.
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[2018] 7 S.C.R.
SC 755 = [1969] 2 SCR 253 ; Collector of Central
Excise v. Parle Exports (P) Ltd. (1989) 1 SCC 345 :
[1988] 3 Suppl. SCR 933 ; Mangalore Chemicals &
Fertilizers Ltd. v. Dy. Commissioner of Commercial
Taxes (1992) 1 Suppl. SCC 21 : [1991] 3 SCR 336 ;
Novopan India Ltd. v. Collector of Central Excise and
Customs (1994) 3 Suppl. SCC 606 : [1994] 3 Suppl.
SCR 549 ; Tata Iron & Steel Co. Ltd. v. State of
Jharkhand (2005) 4 SCC 272 : [2005] 2 SCR 1207 -
relied on.
Collector of Customs and Central Excise, Guntur and
Ors. v.. Surendra Cotton Oil Mills and Fertilizers Co.
and Ors. (2001) 1 SCC 578 : [2000] 5 Suppl. SCR
701 ; Union of India v. The Commercial Tax Officer,
West Bengal and Ors. AIR 1956 SC 202 : [1955] SCR
1076 ; Union of India v. Wood Papers Limited (1990) 4
SCC 256 ; Govind Saran Ganga Saran v. Commissioner
of Sales Tax (1985) Suppl. SCC 205 : [1985] SCR
985 ; Mathuram Agrawal v. Sate of Madhya Pradesh
(1999) 8 SCC 667 : [1999] 4 Suppl. SCR 195 ; Indian
Banks' Association v. Devkala Consultancy Service
(2004) 4 JT 587 = AIR 2004 SC 2615 ; Consumer
Online Foundation v. Union of India (2011) 5 SCC
360 : [2011] 5 SCR 911 - referred to.
Commissioner of Inland Revenue v. James Forrest
(1890) 15 AC 334 (HL) - referred to.
Case Law Reference
[1997] 1 Suppl. SCR 434
 overruled
Para 1
[2000] 5 Suppl. SCR 701
 referred to
Para 4
[2001] 1 Suppl. SCR 147
 relied on
Para 18
[1958] SCR 360
 relied on
Para 19
[1995] 2 Suppl. SCR 807
 relied on
Para 20
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[1990] 3 SCR 111
relied on
Para 24
(2014) 11 SCC 672
relied on
Para 26
[1986] 1 SCR 25
relied on
Para 26
[1999] 1 SCR 1207
relied on
Para 26
[2004] 1 SCR 564
relied on
Para 26
[1955] SCR 1076
referred to
Para 29
[1969] 2 SCR 253
relied on
Para 34
(1990) 4 SCC 256
referred to
Para 35
[1988] 3 Suppl. SCR 933
relied on
Para 35
[1991] 3 SCR 336
relied on
Para 36
[2010] 13 SCR 820
followed
Para 38
[1985] SCR 985
referred to
Para 42
[1999] 4 Suppl. SCR 195
referred to
Para 42
AIR 2004 SC 2615
referred to
Para 42
[2011] 5 SCR 911
referred to
Para 42
[1994] 3 Suppl. SCR 549
relied on
Para 49
[2005] 2 SCR 1207
relied on
Para 50
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3327
of 2007.
From the final Order No. A/25 to 32/WZB/06 C.I. (C.S.T.B.)
dated 05.12.2005 of CESTATE, Mumbai in Appeal Nos. C/199, 200,
210, 211-R and 416 to 419/2000-Mum.
Ms. Pinky Anand, ASG, Yashank Adhyaru, Sr. Adv., Ms. Binu
Tamta, Ms. Shirin Khajuria, Ms. Ayushi Gaur, Sanjay Kr. Pathak,
Ms. Saudamini Sharma, Sumit Teterwal, Rishab Jain, B. Krishna Prasad,
Somnath Shukla, M. P. Devanath, Abhishek Anand, Udit Jain,
Ms. Ashwini Chandrasekaran, Praveen Kumar, Advs. for the appearing
parties.
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v.
M/S. DILIP KUMAR AND COMPANY & ORS.
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SUPREME COURT REPORTS
[2018] 7 S.C.R.
The Judgment of the Court was delivered by
N.V. RAMANA, J. 1. This Constitution Bench is setup to
examine the correctness of the ratio in Sun Export Corporation,
Bombay v. Collector of Customs, Bombay, (1997) 6 SCC 564
[hereinafter referred as 'Sun Export Case' for brevity], namely the
question is - What is the interpretative rule to be applied while interpreting
a tax exemption provision/notification when there is an ambiguity as to
its applicability with reference to the entitlement of the assessee or the
rate of tax to be applied?
2. In Sun Export Case (supra), a three-Judge Bench ruled that
an ambiguity in a tax exemption provision or notification must be
interpreted so as to favour the assessee claiming the benefit of such
exemption. Such a rule was doubted when this appeal was placed before
a Bench of two-Judges. The matter then went before a three-Judge
Bench consisting one of us (Ranjan Gogoi, J.). The three-Judge Bench
having noticed the unsatisfactory state of law as it stands today, opined
that the dicta in Sun Export Case (supra), requires reconsideration and
that is how the matter has been placed before this Constitution Bench.
3. Few facts necessary, to appreciate the issue involved are as
follows - the respondents imported a consignment of Vitamin - E50
powder (feed grade) under Bill of Entry No. 8207, dated 19.08.1999.
They claimed the benefit of concessional rate of duty at 5%, instead of
standard 30%, as per the Customs Notification No. 20/1999 and classified
the product under Chapter 2309.90 which admittedly pertains to prawn
feed. They relied on the ratio in Sun Export Case (supra) and claimed
the benefit of exemption. The benefit of Customs Notification No. 20/
1999 was, however, denied to the respondents on the plea of the
department that the goods under import contained chemical ingredients
for animal feed and not animal feed/prawn feed, as such, the concessional
rate of duty under the extant notification was not available. The
department classified the consignment under Chapter 29 which attracts
standard rate of customs duty. The adjudicating authority, namely, the
Assistant Commissioner of Customs, distinguished Sun Export Case
(supra), while accepting the plea of the department to deny the
concessional rate. The Commissioner of Customs (Appeals) reversed
the order of the Assistant Commissioner and came to the conclusion
that Sun Export Case (supra) was indeed applicable. The department
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then approached the Customs, Excise and Service Tax Tribunal
(CESTAT), which affirmed the order of the Commissioner of Customs
(Appeals). Aggrieved thereby, the present appeal is filed.
4. When the appeal was placed, as noticed earlier, before a Bench
of two-Judges, the ruling in Sun Export Case (supra) was doubted,
observing as follows-
"We have serious doubts as to whether the Bombay High Court
judgment affirmed in Sun Export Corporation's case is correct.
First and foremost, it is clear that the subsequent exemption
Notification largely expanded the first Notification which referred
only to animal feeds and nothing else. That being the case, it would
be difficult to say that a large number of other categories which
have subsequently been added would be clarificatory and
therefore, retrospective. Further, we also feel that in view of the
catena of judgments of this Court which have held that an
exemption Notification has to be strictly construed (that is, if the
person claiming exemption does not fall strictly within the letter of
the Notification, he cannot claim exemption), have also been
ignored by this Court in Sun Export Corporation's case in paragraph
13 thereof. Apart from this, the view of this Court in paragraph 13
that it is well-settled that if two views are possible, one favourable
to the assessee in matters of taxation has to be preferred is
unexceptionable. However, this Court was not concerned in that
case with the charging Section of a taxation statute. It was
concerned with the interpretation of an Exemption Notification
which, as has been stated above, would require the exactly opposite
test to be fulfilled."
Further this Court found that the subsequent judgment in Collector
of Customs and Central Excise, Guntur and Ors. V. Surendra Cotton
Oil Mills and Fertilizers Co. and Ors., 2001 (1) SCC 578 [hereinafter
referred as 'Surendra Cotton Oil Mills Case' for brevity],
distinguished Sun Export Case (supra), which mandated this Court to
take a re-look at the proposition laid down by the earlier cases in the
following manner-
"We also find that in the subsequent judgment of this Court,
Surendra Cotton Oil Mills's case, this Court has distinguished the
Sun Export Corporation's case and held that it dealt with 'animal
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI v.
M/S. DILIP KUMAR AND COMPANY & ORS. [N. V. RAMANA, J.]
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[2018] 7 S.C.R.
feed' which was large enough to include 'animal feed supplements'
whereas the facts of Surendra Cotton Oil Mills's case showed
that ingredients of animal feed could not be held to be included in
'animal feed'. In our opinion, this Court did not adequately deal
with why Sun Exports Corporation's case which is a binding
decision of a three Judges Bench should not be followed, apart
from a specious distinction between 'ingredients' and
'supplements' which is logically speaking a distinction without a
difference.
...
This being the unsatisfactory state of law as it stands today,
we feel that this matter should be placed before Hon'ble
the Chief Justice of India to constitute an appropriate Bench
to resolve the doubts pointed out by us in the body of this
Order."
(emphasis supplied)
5. We feel that the reference to Surendra Cotton Oil Mills Case
(supra), may not be necessary as the distinction was drawn on a factual
footing, which this Court may not concern itself with, as we are only
concerned with the principle of law. With this, the Division Bench was
of the tentative view that the opinion expressed in Sun Export Case
(supra) would require reconsideration, as the proposition laid down therein
was unsatisfactory, and therefore placed before the Chief Justice of
India for constituting an appropriate Bench.
6. When the matter was placed before a three Judge Bench
presided over by one of us (Ranjan Gogoi, J.), the Bench reiterated the
view for reconsideration of the Sun Export Case (supra) 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 (supra) was decided by a Bench comprising of three learned
judges of this Court. Hence, this matter came to be placed before this
Bench of Five Judges with following observations-
"In paragraph 13 of the order of this Court in Sun's case,
views have beenexpressed with regard to the interpretation
of an exemption notification to support the conclusion
reached. The same may require a reconsideration.
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That apart, in the referral order it has been noticed that Sun's
Case (supra) has been distinguished in 'Collector of Central
Excise, Guntur vs. Surendra Cotton Oil Mills & Fert. Co. The
basis on which the said distinction has been drawn needs to be
further pursued.
Having considered the matter at some length, we are of
the tentative view, that the opinion expressed in Sun's case
(supra) may require a reconsideration. Being a co-ordinate
Bench, we believe we ought not to proceed any further in
the matter. Hence, we direct the Registry to lay the papers
before the Hon'ble the Chief Justice of India for
appropriate orders."
(emphasis supplied)
7. The learned Additional Solicitor General, Ms. Pinky Anand,
submits that a tax exemption statute or notification needs to be strictly
interpreted. According to her, strict interpretation is literal rule of
interpretation, which means that Court has to apply the provision
reading the language therein and no interpretation is required if the
language is clear. In the event of any ambiguity, according to her, the
benefit has to be given to the revenue and that such ambiguity in tax
exemption provision must not be interpreted to benefit the assessee who
fails to demonstrate without any doubt that such assessee is covered by
the tax exemption notification. She elaborated her arguments by relying
on various judgments and contends that the ratio in Sun Export Case
(supra), which was doubted in Surendra Cotton Oil Mills Case
(supra), is not correct law. On merits of the case, she submitted that the
artificial distinction created by Surendra Cotton Oil Mills Case
(supra), in distinguishing the ingredients from supplements is not sound
and may not be accepted by the Court.
8. Per contra, among others, Mr. Somnath Shukla, learned
counsel appearing on behalf of the respondents would submit that the
ratio and observations in Sun Export Case (supra) has to be
considered holistically without giving any narrow meaning to the
conclusion arrived therein. The rule of strict interpretation cannot be
applied in abstract. It has to be applied keeping in view the
interpretation to be used in relation to Customs Tariff Entry. According
to the learned counsel, when the Customs Tariff Entry is interpreted
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broadly, the same should be adopted in interpreting exemption
notification. Indeed, the learned senior counsel would contend that the
rule of strict interpretation should be limited to the eligibility conditions of
an exemption notification and while conferring the benefits to such
exemption. He distinguished all the judgments relied on by the
appellants and submits that "prawn feed supplements" would also be
included under the head "prawn feed", and the judgment of the Tribunal
impugned in these appeals does not warrant any interference.
9. Sun Export Case (supra) was a case against the judgment of
the High Court of Judicature, Bombay. It was concerned with the
interpretation of tax exemption notification, being Notification
No. 234/1982 - CE, dated 01.11.1982, issued by the Central
Government under sub-section (1) of Section 25 of the Customs Act.
The High Court considered the issue whether Vitamin AD-3 mix (feed
grade)/animal feed supplement could be included under the head
'animal feed, including compound livestock feed'. The Bombay High
Court decided, in the affirmative, in favour of the assessee. The case
then landed in this Court, which was persuaded to expand the meaning
of 'animal feed' in the light of subsequent notification issued in 1984,
which largely expanded the scope of exemption to the effect that
'animal feed, including compound livestock feed, animal feed
supplements and animal feed concentrates'. This Court indeed
countenanced the plea, namely, whenever there is ambiguity as to whether
the subject matter was included or not, then the benefit of the same
should be conferred on the assessee. The relevant portion in Sun
Export Case (supra), reads as follows:
"13. We are in agreement with the above view expressed by the
Bombay High Court. No doubt it was contended on behalf of the
Revenue that the contrary view taken by the Tribunal has been
challenged in this Court which was rejected in limine at the
admission stage. We do not think that dismissal at the admission
stage can be relied upon as a binding precedent. Even assuming
that there are two views possible, it is well settled that one
favourable to the assessee in matters of taxation has to be
preferred."
 (emphasis supplied)
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10. There cannot be any doubt that the ratio in Sun Export Case
(supra) that, if two views are possible in interpreting the exemption
notification, the one favourable to the assesseee in the matter of
taxation has to be preferred. This principle created confusion and
resulted in unsatisfactory state of law. In spite of catena of judgments
of this Court, which took the contra view, holding that an exemption
notification must be strictly construed, and if a person claiming
exemption does not fall strictly within the description of the notification
otherwise then he cannot claim exemption.
11. About three years after Sun Export Case (supra), in the year
2000, this Court in Surendra Cotton Oil Mills Case (supra), expressed
reservations as to the soundness of the dicta in Sun Export Case
(supra), observing that Sun Export Case (supra) ignored catena of
judgments of this Court expressing contra view. This Court prima
facie came to the conclusion with regard to the principle that when two
views are possible, one favourable to the assessee in matters of taxation
has to be preferred, is unexceptionable when interpreting the charging
section of a taxation statute, but the opposite principle would be
applicable in interpretation of exemption notification. The three-Judge
Bench in the referral order further observed that the views expressed in
Sun Export Case (supra) with regard to interpretation of exemption
notification to support the conclusion, required reconsideration.
12. We may, here itself notice that the distinction in interpreting a
taxing provision (charging provision) and in the matter of interpretation
of exemption notification is too obvious to require any elaboration.
Nonetheless, in a nutshell, we may mention that, as observed in Surendra
Cotton Oil Mills Case (supra), in the matter of interpretation of
charging section of a taxation statute, strict rule of interpretation is
mandatory and if there are two views possible in the matter of
interpretation of a charging section, the one favourable to the assessee
need to be applied. There is, however, confusion in the matter of
interpretation of exemption notification published under taxation statutes
and in this area also, the decisions are galore1.
1 See: Sun Export Corporation, Bombay v. Collector of Customs, Bombay and Anr.,
(1997) 6 SCC 564; Commissioner of Central Excise, Pune v. Abhi Chemicals and
Pharmaceuticals Pvt. Ltd., (2005) 3 SCC 541; Collector of Central Excise, Bombay-1
and Anr. v. Parle Exports (Pvt.) Ltd., (1989) 1 SCC 345; Commissioner of Customs
(Import), Mumbai v. Konkan Synthetic Fibres, (2012) 6 SCC 339; Collector of
Customs, Bombay v. Swastic Wollens (Pvt.) Ltd. And Ors., (1988) Supp. SCC 796;
Commissioner of Customs (Preventive), Gujarat v. Reliance Petroleum Ltd., (2008) 7
SCC 220.
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13. We may passingly, albeit, briefly reiterate the general
principles of interpretation, which were also adverted to by both the
counsel. In his treatise, 'Principles of Statutory Interpretation' Justice
G.P. Singh, lucidly pointed the importance of construction of statutes in a
modern State as under:
"Legislation in modern State is actuated with some policy to curb
some public evil or to effectuate some public benefit. The legislation
is primarily directed to the problems before the Legislature based
on information derived from past and present experience. It may
also be designed by use of general words to cover similar problems
arising in future. But, from the very nature of things, it is impossible
to anticipate fully the varied situations arising in future in which
the application of the legislation in hand may be called for, and,
words chosen to communicate such indefinite 'referents' are
bound to be, in many cases lacking in clarity and precision and
thus giving rise to controversial questions of construction."
14. An Act of Parliament/Legislature cannot foresee all types of
situations and all types of consequences. It is for the Court to see whether
a particular case falls within the broad principles of law enacted by the
Legislature. Here, the principles of interpretation of statutes come in
handy. In spite of the fact that experts in the field assist in drafting the
Acts and Rules, there are many occasions where the language used and
the phrases employed in the statute are not perfect. Therefore, Judges
and Courts need to interpret the words.
15. In doing so, the principles of interpretation have been evolved
in common law. It has also been the practice for the appropriate
legislative body to enact Interpretation Acts or General Clauses Act. In
all the Acts and Regulations, made either by the Parliament or
Legislature, the words and phrases as defined in the General Clauses
Act and the principles of interpretation laid down in General Clauses
Act are to be necessarily kept in view. If while interpreting a Statutory
law, any doubt arises as to the meaning to be assigned to a word or a
phrase or a clause used in an enactment and such word, phrase or clause
is not specifically defined, it is legitimate and indeed mandatory to fall
back on General Clauses Act. Notwithstanding this, we should
remember that when there is repugnancy or conflict as to the subject or
context between the General Clauses Act and a statutory provision which
falls for interpretation, the Court must necessarily refer to the provisions
of statute.
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16. The purpose of interpretation is essentially to know the
intention of the Legislature. Whether the Legislature intended to apply
the law in a given case; whether the Legislature intended to exclude
operation of law in a given case; whether Legislature intended to give
discretion to enforcing authority or to adjudicating agency to apply the
law, are essentially questions to which answers can be sought only by
knowing the intention of the legislation. Apart from the general
principles of interpretation of statutes, there are certain internal aids and
external aids which are tools for interpreting the statutes.
17. The long title, the preamble, the heading, the marginal note,
punctuation, illustrations, definitions or dictionary clause, a proviso to a
section, explanation, examples, a schedule to the Act etc., are internal
aids to construction. The external aids to construction are
Parliamentary debates, history leading to the legislation, other statutes
which have a bearing, dictionaries, thesaurus.
18. It is well accepted that a statute must be construed according
to the intention of the Legislature and the Courts should act upon the
true intention of the legislation while applying law and while interpreting
law. If a statutory provision is open to more than one meaning, the
Court has to choose the interpretation which represents the intention of
the Legislature. In this connection, the following observations made by
this Court in District Mining Officer vs. Tata Iron and Steel Co.,
(2001) 7 SCC 358, may be noticed:
"... A statute is an edict of the Legislature and in construing a
statute, it is necessary, to seek the intention of its maker. A statute
has to be construed according to the intent of them that make it
and the duty of the Court is to act upon the true intention of the
Legislature. If a statutory provision is open to more than one
interpretation the Court has to choose that interpretation which
represents the true intention of the Legislature. This task very
often raises the difficulties because of various reasons, inasmuch
as the words used may not be scientific symbols having any precise
or definite meaning and the language may be an imperfect medium
to convey one's thought or that the assembly of Legislatures
consisting of persons of various shades of opinion purport to convey
a meaning which may be obscure. It is impossible even for the
most imaginative Legislature to forestall exhaustively situations
and circumstances that may emerge after enacting a statute where
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its application may be called for. Nonetheless, the function of the
Courts is only to expound and not to legislate. Legislation in a
modern State is actuated with some policy to curb some public
evil or to effectuate some public benefit. The legislation is primarily
directed to the problems before the Legislature based on
information derived from past and present experience. It may
also be designed by use of general words to cover similar problems
arising in future. But, from the very nature of things, it is impossible
to anticipate fully the varied situations arising in future in which
the application of the legislation in hand may be called for, and,
words chosen to communicate such indefinite referents are bound
to be in many cases lacking in clarity and precision and thus giving
rise to controversial questions of construction. The process of
construction combines both literal and purposive approaches. In
other words the legislative intention i.e., the true or legal meaning
of an enactment is derived by considering the meaning of the
words used in the enactment in the light of any discernible purpose
or object which comprehends the mischief and its remedy to which
the enactment is directed..."
19. The well settled principle is that when the words in a statute
are clear, plain and unambiguous and only one meaning can be inferred,
the Courts are bound to give effect to the said meaning irrespective of
consequences. If the words in the statute are plain and unambiguous, it
becomes necessary to expound those words in their natural and
ordinary sense. The words used declare the intention of the
Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957
SC 907, it was held that if the words used are capable of one
construction only then it would not be open to the Courts to adopt any
other hypothetical construction on the ground that such construction is
more consistent with the alleged object and policy of the Act.
20. 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.