Rebate of Duty Admissible Both on Inputs i.e raw materials and Final Goods

Advocate Anandaday Misshra

Supreme Court of India while interpreting Rule 18 of Central Excise Rules, 2002, which is for rebate of excise duty, has held in the case of  Spentex Industries Ltd. Vs. Commissioner of Central Excise that Rebate of Duty is Admissible Both on Inputs i.e raw materials and Final Goods.

Rule 18 Rebate of duty.- Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.

It analysed the usage of the word ” or ” in Rule 18 and held as below :

(iv) Interpretation of word ‘OR’ occurring in Rule 18: The aforesaid discussion leads us to the only inevitable consequence which is this : the word ‘OR’ occurring in Rule 18 cannot be given literal interpretation as that leads to various disastrous results pointed out in the preceding discussion and, therefore, this word has to be read as ‘and’ as that is what was intended by the rule maker in the scheme of things and to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19.

Their Lordships further held that though “or” is understood as disjunctive in nature but for carrying the true intention of the legislation here , the word “or” has to be treated as conjunctive at par with“and” .

It further relied upon the ratio laid down for the purpose of Section 42(2) of the Income Tax Act, 1922 and held as under :

26) Likewise, in Mazagaon Dock Ltd. v. The Commissioner of Income Tax and Excess Profits Tax (1959) 1 SCR 848, word ‘or’ occurring under Section 42(2) of the Income Tax Act, 1922 was construed as ‘and’ when the Court found that the Legislature ‘could not have intended’ use of the expression ‘or’ in that Section. We have already explained the statutory scheme contained in the Act and Rules which express manifest intention of the Legislature which provide for granting of both kinds of rebates to the assessee. In Mazagaon Dock Ltd. (supra), this aspect was explained in the following manner:

“10. The word “or” in the clause would appear to be rather inappropriate as it is susceptible of the interpretation that when some profits are made but they are less than the normal profits, tax could only be imposed either on the one or on the other, and that accordingly a tax on the actual profits earned would bar the imposition of tax on profits which might have been intended, and the word “or” would have to be read in the context as meaning “and”. Vide Maxwell’s Interpretation of Statutes, Tenth Edition, pages 238-239. But that, however, does not affect the present question which is whether the word “derived” indubitably points to the business of the non-resident as the one taxable under S. 42(2) and for the reasons already given the answer must be in the negative.”