benefit of notification providing incentives out of the export carried from the notified container depots

PJ/Case Laws/2010-11/1032

Case: Government of India v/s Indian Tobacco Association

Citation: 2005 (070) RLT 0201 (SC)

Issue:- Whether the benefit of notification providing incentives out of the export carried from the notified container depots allowed in the period when a specific Container depot was not included earlier but the same is included after representations made by association.

Brief Facts:- Respondent is an Association of the cultivators of tobacco. In the year 1997, Government introduced an incentive scheme Duty Entitlement Pass Book Scheme (DEPB) whereby and where under 2% incentive was provided out of the export carried from the notified container depots.

Notification dated 7-4-1997 issued pursuant to or in furtherance of the said policy decision which came into force with effect from 1-4-1997. The Notification granted exemption from payment of additional duty leviable under Section 3 of the Customs Tariff Act to those who had been issued a DEPB by the Licensing Authority.

As 'Guntur' was not mentioned initially in the Notification dated 7-4-1997, Respondent- Association made representation to the Board for an amendment to the said notification, which was made on or about 27-11- 1997.

Respondent made a representation before the Appropriate Authority to the effect that the said Notification dated 27-11-1997 would also cover the period from 7-4-1997 to 27-11-1997 being clarificatory in nature.

The Central Government, however, rejected the said representation of the Respondent. Thereafter, respondent filed a writ petition before the High Court.

Appellant’s Contentions:- Appellant would submit that the notifications dated 7-4-1997 and 27-11-1997 providing for exemption from payment of additional custom duty must be strictly construed. Relying on Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies [(2004) 11 SCC 798], appellant would contend that a subordinate legislation containing exemption from payment of duty would only have a prospective operation. Appellant would contend that having regard to the representation made by the Respondent-Association, the Ministry of Commerce, Director General of Foreign Trade in the Tobacco Board had requested the Ministry of Finance to pass appropriate orders so as to enable the exporters of Inland Container Depot, Guntur to avail the facilities of DEPB Scheme. It was submitted that in relation to the exporters of embroidered silk garments, made-ups and fabrics, the Government had given the benefit with retrospective effect, as would appear from the letter of Ministry of Finance dated 20-12-2001.

Respondent’s Contentions:- Respondent urged that by reason of the Import Policy for the period 1997-2002, the Union of India only sought to simplify the procedure for grant of exemption basing the same on the quality of goods exported on freight on board and as Guntur Station had all along been an Inland Container Depot; there was no reason as to why the said place should have been excluded from the purview of the aforementioned notification.
An exemption notification, it is trite, must be construed having regard to the object and purport which the same seeks to achieve. It is also well-settled that an expression used in a statute should be given its ordinary meaning unless it leads to an anomalous or absurd situation. Respondent has relied upon the following cases:
Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies [(2004) 11 SCC 798]
Tata Iron & Steel Co. Ltd. v. State of Jharkhand and Others [(2005) 4 SCC 272

Reasoning of the Judgment: The notification dated 7-4-1997 is an exemption notification whereby and where under the Export and Import Policy of the Union of India was implemented. Exemption from payment of additional duty leviable under Section 3 of the Customs Tariff Act, was to be granted/to an exporter, provided he possessed Duty Entitlement Pass Book which was valid at the ports of registration specified therein. The proviso appended to sub-clause (iv) of clause (2) of the notification dated 7-4-1997 empowers the Commissioner of Customs to permit imports and exports from any other seaport, airport, inland container depot or through a land Customs station. The Commissioner of Customs has advisedly not exercised its jurisdiction under the proviso appended to sub-clause (iv) of clause (2) of notification dated 7-4-1997. By reason of the notification dated 27-11-1997, the only amendment made was the words "Tuticorin and Vishakhapatnam" were substituted by the words "Tuticorin, Vishakhapatnam and Kakinada", which are 'sea-ports' and the words "Ludhiana and Hyderabad" were substituted by the words "Ludhiana, Hyderabad, Nagpur, Agra, Faridabad, Jaipur, Guntur and Varanasi" which are 'inland container depots'. It is not in dispute that 'Guntur' was one of the inland container depots. It is also not in dispute that such duty exemption had all along been granted for export from 'Guntur'. In terms of the policy decision, the tobacco exporters had filed blue shipping bills which having not been accepted and they had no option but to file normal white shipping bills, as tobacco was a perishable item.

Had the intention of the Government of India been only to extend the said benefit only to the exporters from any other seaport, airport or inland container depot, recourse to the proviso appended to sub-clause (iv) of clause (2) of the notification dated 7-4-1997 could have been taken. But by reason of the notification dated 27-11-1997, one 'seaport' and 'six inland container depots' have been added. The last two words in the category of seaport, namely, "Tuticorin and Vishakhapatnam" had been substituted by the words "Tuticorin, Vishakhapatnam and Kakinada. Similarly the last two words, namely, Ludhiana and Hyderabad" in the category of inland container depot had been substituted by the words "Ludhiana, Hyderabad, Nagpur, Agra, Faridabad, Jaipur, Guntur and Varanasi. It, therefore, cannot be said to be a case where some other seaports or inland container depots have been added for the purpose of extension of the benefit but the newly added seaports or inland container depots had been made a part of the original notification. The Union of India while making a subordinate legislation had advisedly used the word "substitution" in place of the word "addition". The object and purport of the subsequent notification issued by the Union of India was, thus, to grant the same benefit which had been granted to the exporters who were registered at the other seaports, airports or inland container depots as specified in the notification dated 7-4-1997 but also to those exporters, who had been exporting from such seaports or inland depots as specified in the amended notification dated 27-11-1997.

If the Central Government intended to extend the benefit to the members of the Respondent-Association only with prospective effect, it could have said so explicitly. Such a benefit could also have been extended by taking recourse to the proviso appended to sub-clause (iv) of clause (2) of the notification dated 7-4-1997. It may, therefore, be safely concluded that by reason of the amended notification, the Central Government only intended to rectify a mistake and, thus, the same will have retrospective effect and retroactive operation.
The following cases are relied upon:
Ramkanali Colliery of BCCL v. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh and Another [(2001) 4 SCC 236]
Zile Singh v. State of Haryana & Ors. [(2004) 8 SCC 1]

The Supreme Court is not oblivious of the fact that in certain situations, the Court having regard to the purport and object sought to be achieved by the legislature may construe the word "substitution" as an "amendment" having a prospective effect but such a question does not arise in the instant case. The doctrine of fairness also is now considered to be a relevant factor for construing a statute. In a case of this nature where the effect of a beneficent statute was sought to be extended keeping in view the fact that the benefit was already availed of by the agriculturalists of tobacco in Guntur, it would be highly unfair if the benefit granted to them is taken away, although the same was meant to be extended to them also. For such purposes the statute need not be given retrospective effect by express words but the intent and object of the legislature in relation thereto can be culled out from the background facts.

The question has furthermore to be considered having regard to the language and object discernible from the statute read as a whole. The Respondents were not ineligible from obtaining the benefit. Once they are held to be eligible for obtaining the benefit, the amended notification being an exemption notification should receive the beneficent construction.
It is not a case where the Respondents, like the cases of Mahaan Dairies (supra) and Tata Iron & Steel Co. Ltd. (supra) were ineligible from claiming the benefit. The subsequent notification, thus, should receive a beneficent construction.
The learned Additional Solicitor General relied upon Collector of Central Excise, Bombay-I and Another v. M/s. Parle Exports (P) Ltd. [(1989) 1 SCC 345] for raising the contention that the interpretation of the Executive should receive due consideration. It is not a case where the doctrine of 'Contemporanea Expositio' can be invoked. The order relied upon by the learned Counsel has been impugned by the Respondents by filing the writ petition. It, therefore, cannot be said that by reason thereof the notification had been constructed on administrative side. Reliance was also placed by the learned Additional Solicitor General on H.M. Bags Manufacturer v. Collector of Central Excise [(1997) 11 SCC 696] wherein having regard to the use of the expression "henceforth" the order of the Board was held to have a prospective operation. The said decision, therefore, has no application in the present case. Furthermore, registration at the inland container depot was to remain valid for a period of 12 months only and in that view of the matter too, it cannot be said that the Central Government intended to deprive the Respondents herein who were agriculturists from the benefit of the aforementioned notification dated 7-4-1997 only for a limited period, viz., between 7-4-1997 and 27-11- 1997. We, therefore, are of the opinion that the High Court cannot be said to have committed any error in arriving at the aforementioned conclusion.

Reasoning of Judgment:- The Apex Court noted that an exemption notification, it is trite, must be construed having regard to the object and purport which the same seeks to achieve. It is also well-settled that an expression used in a statute should be given its ordinary meaning unless it leads to an anomalous or absurd situation.

Decision:- Appeal dismissed.

Comment:- This has a land mark decision by Apex Court. The main gist of the notification is that when the words are substituted by an notification in place of addition or amendment, then such substitution will have retrospective effect.

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PJ/Case Laws/2010-11/1032

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