Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and Others
"An exemption notification must be interpreted strictly, the burden being on the assessee to prove that its case falls within it, and any ambiguity in the notification is resolved in favour of the Revenue, unlike ambiguity in a charging provision, which benefits the assessee."
Issues Before the Court
- (i)
What rule of interpretation applies when there is ambiguity about whether an assessee is entitled to the benefit of an exemption notification, or to a concessional rate under it?
- (ii)
Whether Sun Export Corporation v. Collector of Customs, Bombay, which held that such ambiguity must be resolved in favour of the assessee, was correctly decided?
Law & Rules Applicable
- (i)
Customs Act, 1962, Section 25 (power to exempt goods from duty), and the exemption notification in issue, Customs Notification No. 20/1999.
- (ii)
The rule that ambiguity in a charging provision of a taxing statute is resolved in favour of the subject, and the contrary approach to exemptions in Sun Export Corporation v. Collector of Customs, Bombay.
Application to Facts & Circumstances
The respondents imported Vitamin E50 powder (feed grade) in 1999 and claimed the concessional rate of duty that an exemption notification allowed for animal (prawn) feed. The department denied the benefit, treating the goods as an ingredient of feed rather than feed. Benches of two and three Judges, doubting the rule in Sun Export, referred the question of interpretation to a Constitution Bench.
Writing for the Constitution Bench, Ramana J. distinguished charging provisions from exemptions. Where a charging provision is ambiguous, the benefit goes to the subject. An exemption notification, by contrast, must be interpreted strictly: the burden is on the assessee to show that its case comes within the exemption, and if the notification is ambiguous, the benefit of the ambiguity cannot be claimed by the assessee and must be interpreted in favour of the Revenue.
Sun Export, which had held that ambiguity in an exemption notification should be resolved in the assessee's favour, was held not to lay down the correct law, and all decisions taking the same view were overruled.
Having answered the reference, the Constitution Bench sent the appeal back to be decided on its merits by the regular Bench.
Conclusion & Ruling
- (i)
An exemption notification is to be interpreted strictly, and the assessee bears the burden of showing that its case falls within it.
- (ii)
Where an exemption notification is ambiguous, the ambiguity is resolved in favour of the Revenue, not the assessee; Sun Export and the decisions following it were overruled.
- (iii)
The appeal was placed before the regular Bench for decision on its merits.
Authorities Cited
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- Sun Export Corporation v. Collector of Customs, Bombay, (1997) 6 SCC 564 : AIR 1997 SC 2658Full text of Sun Export Corporation v. Collector of Customs, Bombay on Indian Kanoon