Normally exemption is considered as deduction allowable by law which reduces the income that subjected to income tax. In other words it is considered as removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Previously exemption has two buckets, namely personal exemptions and dependent exemptions. Accordingly the exemption notification permits taxpayers to get freedom from tax liability. Such exemptions will be given by the government only with regard to public interest. In the case of UOI V Jalyan Udyog, the hon’ble court held that public interest will be the guiding factor for exemption notification and if there is any presence public interest exist exemption notification will be given partly or wholly.
The law in respect to interpretation of exemption notification is well Settled . An exemption has got to be construed strictly however fairly. there’s no scope of extending the words and expressions utilized in the notification on the premise of analogy or on equitable consideration; there’s conjointly no scope for discerning the supposed intention and inserting a purposeful construction to herald merchandise within the word or the expression utilized within the notification. .Even on the idea that PAGA falls beneath chapter 85, it’s unfeasible to carry that the good thing about the notification is automatic. To assert the benefit about the notification, the elements of CRT should be distinctive beneath chapter eighty five however all the elements of CRT falling thereunder Chapter won’t ipso-facto (by reason of that truth alone) relish the good thing about concessional rate of duty beneath the notification unless they answer the outline of “parts of CRT (other than the glass parts)” in Sl.No. 110 of the notification .The choice between a strict and a liberal construction arises solely just in case of doubt in respect to the intention of the law-makers 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 Interpretative process 3
It was command further duty will perpetually be determined and just exemption granted in respect of a selected excise duty, cannot are available the manner of determination of yet one more duty based mostly with that. There was no difficulty in making the computation of additional duties. The reason employed in SRD Nutrients Private Limited4 that there was nil excise duty, as such, additional duty cannot be charged, is also equally unacceptable as additional duty can always be determined and merely exemption granted in respect of aparticular excise duty, cannot come in the way of determination of yet another duty based thereupon. The proposition urged that simply because one kind of duty is exempted, other kinds of duties automatically fall, cannot be accepted as there is no difficulty in making the computation of additional duties, which are payable under NCCD, education cess, secondary and higher education cess. Moreover, statutory notification must cover specifically the duty exempted. When a particular kind of duty is exempted, other types of duty or cess imposed by different legislation for a different purpose cannot be said to have been exempted5. The decision of larger bench is binding on the smaller bench has been held by this Court in several decisions6. The decisions in Modi Rubber7. and Rita Textiles Private Limited8 are binding on us being of Coordinate Bench, and we respectfully follow them.
Exemption may be recognized, the person or property claimed to be exempted should come back clearly at intervals the language apparently granting the exemption. Accordingly , the principle to be unbroken seeable whereas decoding exemption notification is that the words given within the exemption notification is to be gathered from the language used within the notification. Notification by that exemption or alternative advantages square measure provided by the govt. . in exercise of its statutory powers ordinarily have some purpose. Such purpose isn’t to be defeated nor those that could also be entitled for it square measure to be disadvantaged by decoding the notification which can provides it some meaning apart from what’s clearly and plainly flowing from it.
A notification of exemption has to be interpreted in terms of its language. Where the language is plain and clear, effect must be given to it. While interpreting the exemption notification, one cannot go by rules of interpretation applicable to cases of classification under tariff 9. Statutory rule of Interpretation is given under tariff schedule. Exemption notifications are not part of the Schedule as they are issued under the Act (Customs or Excise) and Rules have been issued under the system of delegated legislation. The Schedule is a part of the main Act passed by Parliament. Since the exemptions are not part of the Schedule and since they do not constitute a question of classification under the Rules of Interpretation10. The most logical view on the issue is that if the theory is accepted that Rules of Interpretation, Chapter and Section Notes are not applicable to the exemption notifications and Rules under the Act.
1 AIR 1994 SC 88 = 1993 (68) ELT 9 (SC)
2 Hico Products Ltd. v. Collector of. Central Excise, 1994 (47) ECC 63 (SC) : Bombay Chemical Pvt. Ltd. v. Collector of Central Excise, Bombay, 1995 (77) ELT 3 (SC) :
3 Mangalore Chemicals and Fertilisers Ltd. v. Deputy Commissioner of Commercial Taxes and Ors. (1992 Supp. (1) SCC 21)
6 Mahanagar Railway Vendors’ Union v. Union of India & Ors. (1994) Suppl. 1 SCC 609, State of Maharashtra & Ors. v. Mana Adim Jamat Mandal, AIR 2006 SC 3446.
7 Union of India v. Modi Rubber Limited, (1986) 4 SCC 66
8 Rita Textiles Private Limited v. Union of India, 1986 SCC Supp. 557
9 Commnr. Of Central Excise, Jaipur vs M/S. Mewar Bartan Nirman Udyog CIVIL APPEAL NO.3269 OF 2003
10 Victory Gramophone v. C.C., New Delhi – 1997(96)ELT689